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20 March, 06:15

The cash flow statement of the United Company is in process for 2019. The United Company is reporting the following balances: 12/31/18 12/31/19 Equipment $ 100,000 $ 170,000 Loss on sale of equipment 0 10,000 Accumulated depreciation-equipment 75,000 95,000

During 2019, United sold equipment costing $30,000 for $12,000 and made several purchases of new equipment for cash.

If these were the only investing activities, the cash flow from investing activities is a net cash:

Multiple Choice

a. outflow of $12,000.

b. inflow of $12,000.

c. outflow of $88,000.

d. inflow of $88,000.

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Answers (1)
  1. 20 March, 06:29
    0
    c. outflow of $88,000.

    Explanation:

    The computation of cash flow from investing activities is a net cash shown below:-

    If these are investment activities only, the cash flow from investment activities is a net cash flow

    Cash flow from investing activities is a net cash = (Equipment as on 12/31/2019 - Equipment as on 12/31/2018) + (Equipment costing during 2019 - Sold equipment)

    ($170,000 - $100,000) + ($30,000 - $12,000)

    = $88,000

    So, it is a outflow of $88,000.

    Therefore for computing the cash flow from investing activities we simply applied the above formula.
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