Question

Flow Company has provided the following information for the year ended December 31, 2019: Cash paid for interest, $25,000 Cash paid for dividends, $7,000 Cash dividends received, $5,000 Cash proceeds from bank loan, $39,000 Cash purchase of treasury stock, $16,000 Cash paid for equipment purchase, $32,000 Cash received from issuance of common stock, $42,000 Cash received from sale of land with a $37,000 book value, $29,000 Acquisition of land costing $56,000 in exchange for preferred stock issuance. Payment of $150,000 note payable by exchanging used machinery with a $82,000 book value and $150,000 fair value How much was Flow's net cash flow from investing activities?

Answer 1

Flow Company's net cash flow from investing activities is a negative $3,000, which indicates a larger cash outflow for capital expenditures than inflow from the sale of assets during 2019.

Step-by-step explanation:

To calculate Flow Company's net cash flow from investing activities for the year ended December 31, 2019, we must consider certain types of cash transactions that generally include cash paid for the purchase of long-term assets and cash received from the sale of long-term assets. The provided information lists various cash flows, from which we can identify the relevant investing activities.

• Cash paid for equipment purchase: $32,000 (outflow)
• Cash received from the sale of land with a $37,000 book value: $29,000 (inflow)

To find the net investing cash flow, we subtract the cash outflows from the cash inflows:

Net investing cash flow = Cash inflows - Cash outflows

$29,000 (inflows from land sale) - $32,000 (outflows for equipment) = -$3,000

Therefore, the net cash flow from investing activities is -$3,000. Note that we do not include transactions like cash received from issuance of common stock, dividends received or paid, and acquisition of land for stock issuance since these are financing or operating activities, not investing activities.

Answer 2

Net cash flow from investing activities = $5,000

Step-by-step explanation:

As per the data given in the question,

Cash paid for interest = $25,000

Cash paid for dividend = $7,000

Cash dividend received = $5,000

Cash fro, bank loan = $39,000

Cash paid to purchase equipment = $32,000

Cash received from selling the land = $37,000

Net cash flow from investing activities = Cash received from selling the land - Cash paid to purchase equipment

= $37,000 -$32,000

= $5,000