Question

The cash flow statement of the United Company is in process for 2019. The United Company is reporting the following balances: 12/31/18 12/31/19 Equipment $ 100,000 $ 170,000 Loss on sale of equipment 0 10,000 Accumulated depreciation—equipment 75,000 95,000

During 2019, United sold equipment costing $30,000 for $12,000 and made several purchases of new equipment for cash.
If these were the only investing activities, the cash flow from investing activities is a net cash:
Multiple Choice
a. outflow of $12,000.
b. inflow of $12,000.
c. outflow of $88,000.
d. inflow of $88,000.

Answer 1

c. outflow of $88,000.

Step-by-step explanation:

The computation of cash flow from investing activities is a net cash shown below:-

If these are investment activities only, the cash flow from investment activities is a net cash flow

Cash flow from investing activities is a net cash = (Equipment as on 12/31/2019 - Equipment as on 12/31/2018) + (Equipment costing during 2019 - Sold equipment)

($170,000 - $100,000) + ($30,000 - $12,000)

= $88,000

So, it is a outflow of $88,000.

Therefore for computing the cash flow from investing activities we simply applied the above formula.