The net cash flows from investing activities under GAAP for this scenario amount to $275, considering cash transactions related to the acquisition and disposal of long-term assets and investments.
Cash flows from investing activities are calculated by considering cash transactions related to the acquisition and disposal of long-term assets and investments. In this scenario:
Cash collections from customers ($850): This is an operating activity and is not considered in investing activities.
Purchase of used equipment ($225): This is a cash outflow related to investing activities, as it involves acquiring a long-term asset.
Depreciation expense ($225): Depreciation is a non-cash expense and does not impact cash flows. Therefore, it is not considered in cash flows from investing activities.
Sale of investments ($500): This is a cash inflow related to investing activities, representing the disposal of an investment.
Dividends received ($120): Dividends received are classified as operating activities and are not included in investing activities.
Interest received ($225): Interest received is classified as operating activities and is not included in investing activities.
Net Cash Flows from Investing Activities:
(−225) + 500 = 275
Therefore, the net cash flows from investing activities under GAAP for this scenario are $275.
Complete question:
Based on the following information, compute cash flows from investing activities under GAAP.
Cash collections from customers - $ 850
Purchase of used equipment - 225
Depreciation expense - 225
Sale of investments - 500
Dividends received - 120
Interest received - 225