Question

Two years ago, bethel, incorporated bought $49,500 in bonds from another company. this month, it sold half of those bonds for $22,440 and purchased the common stock of another company for $1,900. on the statement of cash flows for this accounting period, bethel would report a net cash:

multiple choice
A. outflow of $22,440 from investing activities.
B. inflow of $20,540 from investing activities.
C. outflow of $20,540 from investing activities.
D. inflow of $22,440 from investing activities.

Answer 1

Bethel, Incorporated will report a net cash inflow of $20,540 from investing activities on their statement of cash flows after selling half of their bonds for $22,440 and purchasing stock for $1,900. The correct answer is option B.

Step-by-step explanation:

To calculate the net cash effect on Bethel, Incorporated from its investing activities according to the given scenario, we need to consider both the sale of the bonds and the purchase of stock. Originally, the company had $49,500 in bonds. This period, it sold half of those for $22,440. Then, it purchased common stock for $1,900. The net cash flow from these investing activities would be calculated by subtracting the purchase from the sale proceeds:

Sale of bonds: $22,440

Purchase of stock: - $1,900

Net cash flow: $22,440 - $1,900 = $20,540

The net cash inflow from investing activities, therefore, is $20,540. This means that on the statement of cash flows for this period, Bethel would report a net cash inflow of $20,540 from investing activities, which corresponds to option B.