Question

Dover Co.'s comparative balance sheet indicated that the Equipment account increased by $40,000. Upon further investigation of the account changes, it is determined that Dover purchased equipment totaling $70,000 for the year. It also sold equipment with an original cost of $30,000 for $8,000 cash. Assuming these are the only transactions affecting the investing activities, Dover will report net cash flows provided by (used in) investing activities of:

A)($40,000).
B)($70,000).
C)($32,000).
D)($62,000).

Answer 1

The correct answer is D) ($62,000).

Step-by-step explanation:

To find the net cash flows provided by (used in) investing activities, we need to calculate the total amount of cash that was spent on purchasing equipment, minus the total amount of cash that was received from selling equipment. In this case, Dover spent $70,000 on purchasing equipment and received $8,000 from selling equipment, so the net cash flows provided by (used in) investing activities is $70,000 - $8,000 = $62,000.

The other options given are incorrect because they do not take into account both the purchasing and selling of equipment.

Option A) only considers the increase in the Equipment account, which does not provide a complete picture of the company's investing activities.

Option B) only considers the amount spent on purchasing equipment, ignoring the cash received from selling equipment.

Option C) only considers the amount received from selling equipment, ignoring the cash spent on purchasing equipment.