The purpose of this case is to understand how bonds are issued and how bonds are shown on the financial statements. Necessary portions of the 10-K for Macy's and a bond prospectus for a Macy bond issue are included the file, "Case 1 Reference Material." Answer the following questions using complete sentences in the spaces provided. We are focusing on the 3.45% senior note due 2021 issued December 7, 2015. Move to the Statement of Cash Flows and specifically, Financing Activities 11. How much does Macy show as the increase to cash for the note? 12. Is this amount the proceeds from the issue or the principal amount of the note? 13. Prepare the journal entry to record the issuance of the note. Date Accounts Debit Credit MACY'S, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (millions) 2014 2013 $ 1,526 $ 1,486 288 87 1,036 73 88 1,020 62 (5) (8) 22 44 (249) (61) 2015 Cash flows from operating activities: Net income $ 1,070 Adjustments to reconcile net income to net cash provided by operating activities: Impairments, store closing and other costs Depreciation and amortization 1,061 Stock-based compensation expense 65 Amortization of financing costs and premium on acquired debt (14) Changes in assets and liabilities: (Increase) decrease in receivables (45) (Increase) decrease in merchandise inventories Increase in prepaid expenses and other current assets Increase in other assets not separately identified R (1) Increase (decrease) in merchandise accounts payable (78) Increase (decrease) in accounts payable, accrued liabilities and other items not separately identified (144) Increase (decrease) in current income taxes Increase (decrease) in deferred income taxes (1) Increase (decrease) in other liabilities not separately identified Net cash provided by operating activities 1,984 Cash flows from investing activities: Purchase of property and equipment (777) Capitalized software (336) Acquisition of Bluemercury, Inc., net of cash acquired (212) (1) 101 (21) (69) 29 (142) (88) 10 197 2,709 2,549 (770) (298) (607) (256) 24 315 Disposition of property and equipment 204 172 Other, net 29 (74) (57) Net cash used by investing activities (1,092) (970) (788) Cash flows from financing activities: Debt issued 499 1,044 400 Financing costs (4) (9) (9) Debt repaid (152) (870) (124) Dividends paid (456) (421) (359) Increase (decrease) in outstanding checks (83) 133 Acquisition of treasury stock (2,001) (1,901) (1,571) Issuance of common stock 163 258 Proceeds from non-controlling interest 5 Net cash used by financing activities (2,029) (1,766) (1,324) Net increase (decrease) in cash and cash equivalents (1,137) (27) 437 Cash and cash equivalents beginning of period 2,246 2,273 1,836 Cash and cash equivalents end of period $ 1,109 $ 2,246 $ 2,273 Supplemental cash flow information: Interest paid $ 383 $ 413 $ 388 Interest received 2 2 Income taxes paid (net of refunds received) 635 834 835 The accompanying notes are an integral part of these Consolidated Financial Statements