Question

Use the indirect method to answer questions 7-10. The following information is available for Armstrong Company:

Net income $450
Increase in plant and equip. $170
Depreciation expense 80
Payment of dividends 10
Decrease in accts. receiv. 20
Increase in long-term debt 100
Increase in inventories 15
Decrease in accounts payable
30

What is cash from investing activities for Armstrong Company?
a. ($160)
b. $160
c. $170
d. ($170)

Answer 1

The cash from investing activities for Armstrong Company is represented by the payment for plant and equipment of $170, which is recorded as a negative amount, giving the answer of ($170).

Step-by-step explanation:

The cash from investing activities for Armstrong Company can be calculated by considering changes in long-term assets. In this scenario, the increase in plant and equipment would be taken as cash used by investing activities. The depreciation expense is a non-cash adjustment to net income and is not considered in the investing section of the cash flow statement.

Therefore, the cash used for investing activities is the increase in plant and equipment, which amounts to:

• Payment for plant and equipment: $170

As the payment represents cash outflow, it should be recorded as a negative amount in the cash flow from investing activities. Hence, the correct answer is:

• Cash from investing activities: ($170)