Question

Use the indirect method to answer questions 11-14. The following information is available for Felix Company:

Net income $300
Decrease in plant and equip.
$40
Depreciation expense 20
Increase in deferred tax asset
5
Gain on sale of assets 35
Decrease in long-term debt 50
Increase in inventories 25
Decrease in accounts payable
15

What is cash from investing activities for Felix Company?
a. $5
b. $40
c. $75
d. $10

Answer 1

The cash from investing activities for Felix Company is $5. This is calculated by subtracting the gain on the sale of assets ($35) from the decrease in plant and equipment ($40), which equals $5.

Step-by-step explanation:

To calculate the cash from investing activities for Felix Company, we will examine the changes in plant and equipment as well as any gains or losses from the sale of assets, as these typically fall under investing activities. The information provided indicates a decrease in plant and equipment of $40, which means that cash was received, and a gain on the sale of assets of $35. To find the net cash provided by (or used in) investing activities, we subtract the gain on the sale of assets from the proceeds received from the decrease in plant and equipment, since the gain is included in the net income but does not involve an actual cash flow at the time of the sale.

Cash from investing activities = Decrease in plant and equipment - Gain on sale of assets
= $40 - $35
= $5