Question

Xanthe Corporation had the following transactions occur in the current year:

1. Cash sale of merchandise inventory.
2. Sale of delivery truck at book value.
3. Sale of Xanthe common stock for cash.
4. Issuance of a note payable to a bank for cash.
5. Sale of a security held as an available-for-sale investment.
6. Collection of loan receivable.
How many of the above items will appear as a cash inflow from investing activities on a statement of cash flows for the current year?
a. Five items
b. Four items
c. Three items
d. Two items

Answer 1

Three of the transactions listed are considered as cash inflows from investing activities in the cash flows statement: the sale of the delivery truck, the sale of an available-for-sale security, and the collection of a loan receivable.

Step-by-step explanation:

The question is asking how many of the transactions listed would be classified as cash inflow from investing activities on a statement of cash flows. Investing activities include transactions involving the acquisition and disposal of long-term assets and other investments not included in cash equivalents. The correct items are:

• Sale of delivery truck at book value.
• Sale of a security held as an available-for-sale investment.
• Collection of loan receivable.

Items such as cash sales of merchandise inventory, issuance of common stock for cash, and issuance of a note payable are not investing activities—they are operating and financing activities respectively. Therefore, the answer is three items: the sale of the delivery truck, the sale of the available-for-sale security, and the collection of a loan receivable.