Question

Green Co. had the following equity transactions at December 31:Cash proceeds from sale of investment in Blue Co. (carrying value - $60,000) $75,000Dividends received on Grey Co. stock 10,500Common stock purchased from Brown Co. 38,000What amount should Green recognize as net cash from investing activities in its statement of cash flows at December 31 under U.S. GAAP?a. $37,000b. $47,500c. $75,000d. $85,500

Answer 1

In the statement of cash flows, net cash from investing activities includes the cash inflows and outflows related to investing activities. To calculate the net cash from investing activities, you need to subtract the cash outflows from the total cash inflows.

Step-by-step explanation:

In the statement of cash flows, net cash from investing activities includes the cash inflows and outflows related to investing activities. In this case, the cash proceeds from the sale of the investment in Blue Co. ($75,000) and the dividends received on Grey Co. stock ($10,500) are considered cash inflows from investing activities. The purchase of common stock from Brown Co. ($38,000) is considered a cash outflow from investing activities. To calculate the net cash from investing activities, we subtract the cash outflow from the total cash inflows:

Net cash from investing activities = Cash proceeds from sale of investment in Blue Co. + Dividends received on Grey Co. stock - Common stock purchased from Brown Co.

Net cash from investing activities = $75,000 + $10,500 - $38,000 = $47,500