Question

The following summary transactions occurred during the year for Daisy.

Cash received from:
Collections from customers $398,000
Interest on notes receivable 15,000
Collection of notes receivable 63,500
Sale of investments 36,300
Issuance of notes payable 118,000
Cash paid for:
Purchase of inventory 178,000
Interest on notes payable 14,000
Purchase of equipment 103,000
Salaries to employees 108,000
Payment of notes payable 34,000
Dividends to shareholders 1,000

Required:
Calculate net cash flows from investing activities. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

To find Daisy's net cash flow from investing activities, we add cash received from the sale of investments and collection of notes receivable, then subtract cash paid for equipment, resulting in a net cash outflow of $3,200 for the year.

Step-by-step explanation:

To calculate the net cash flows from investing activities for Daisy, we need to consider only the transactions that pertain to investments. The cash flows from investing activities include cash received from the sale of investments and the collection of notes receivable, and cash paid for the purchase of inventory and purchase of equipment.

The formula for net cash flow from investing activities is:

Net cash flow from investing activities = Cash received from sale of investments + Cash received from collection of notes receivable - Cash paid for purchase of investments - Cash paid for purchase of equipment

Using the provided information:

• Sale of investments: $36,300
• Collection of notes receivable: $63,500
• Purchase of equipment: -$103,000

Since the purchase of inventory is considered an operating activity and not an investing activity, it is not included in this calculation.

We then calculate:

Net cash flow from investing activities= $36,300 + $63,500 - $103,000 = -$3,200

The negative sign indicates a net outflow of cash in investing activities for the year.