Question

Canadian Beer reported equipment sold for $222 million cash and new equipment purchased $1,515 million cash. The equipment sold had a net book value of $150 million. Cash flow from investing activities would show:

A. Cash paid for equipment of $1,293 million.
B. A net outflow of $1,365 million.
C. An inflow of $222 million and outflow of $1,515 million.
D. An inflow of $222 million and outflow of $150 million.

Answer 1

The cash flow from investing activities for Canadian Beer shows a cash inflow from the sale of equipment at $222 million and an outflow for the purchase of new equipment at $1,515 million, resulting in a net outflow option A: Cash paid for equipment of $1,293 million.

Step-by-step explanation:

The question relates to the cash flow from investing activities reported by Canadian Beer. To determine the cash flow, we must consider the cash received from the sale of old equipment and the cash paid for the purchase of new equipment. Canadian Beer sold equipment for $222 million cash which had a net book value of $150 million. The new equipment was purchased for $1,515 million cash. The cash flow from investing activities would therefore be an inflow from the sale of equipment and an outflow for the purchase of new equipment.

Calculating the net cash flow, we take the inflow from the sale of equipment at $222 million and subtract the total cash paid for the new equipment, which is $1,515 million, resulting in a net outflow of:

$222 million (inflow) - $1,515 million (outflow) = $-1,293 million.

Hence, the correct option is A. Cash paid for equipment of $1,293 million, after considering the inflow from the sale of the old equipment.