Question

Dunbarn Co. had the following activities during the year: Purchase of inventory - $120,000 Purchase of equipment - 80,000 Purchase of available-for-sale securities - 60,000 Purchase of treasury stock - 70,000 Issuance of common stock - 150,000 What amount should Dunbarn report as cash provided (used) by investing activities in its statement of cash flows for the year?A. $(120,000)

B. $(210,000)
C. $150,000
D. $(140,000)

Answer 1

D) $(140,000)

Step-by-step explanation:

Cash flows are divided into three main areas:

1. operating activities: includes purchase of inventory $120,000
2. financing activities: stock repurchases $70,000 and issuance of common stock $150,000
3. investing activities: include purchase of equipment $80,000 + purchase of available for sale securities $60,000 = $80,000 + $60,000 = $140,000 cash outflow

Answer 2

Answer: A. ($210 000) cash used

Step-by-step explanation:

Purchase of Equipment = $80 000

Purchase of securities = $60 000

Purchase of Treasury stock = $ 70 000

common stock issued = $150 000

Cash used by investing activities = (- 80 000 - 60 000 - 70 000)

Cash used by investing activities = (210 000)

.The purchase of inventory falls under operating activities,therefore we donot include the amount of $120 000 in investing activities

.Issuance of common stock does not generate a cash flow. The cash flow will recognized when there are share issue costs paid in cash or when the company receives cash raised from the issue of shares