Question

Creative Sound Systems sold investments, land, and its own common stock for $32.0 million, $14.8 million, and $39.6 million, respectively. Creative Sound Systems also purchased treasury stock, equipment, and a patent for $20.8 million, $24.8 million, and $11.8 million, respectively. What amount should Creative Sound Systems report as net cash flows from financing activities

Answer 1

The net cash flows from financing activities for Creative Sound Systems should be reported as $29 million.

Step-by-step explanation:

In order to calculate the net cash flows from financing activities for Creative Sound Systems, we need to consider the cash inflows and outflows related to financing activities. Cash inflows from financing activities include the sale of investments, land, and common stock, which amount to $32.0 million, $14.8 million, and $39.6 million respectively. Cash outflows from financing activities include the purchase of treasury stock, equipment, and a patent, which amounts to $20.8 million, $24.8 million, and $11.8 million respectively.

To calculate the net cash flows from financing activities, we subtract the cash outflows from the cash inflows. Therefore, the net cash flows from financing activities for Creative Sound Systems would be:

Net Cash Flows from Financing Activities = Cash Inflows - Cash Outflows

= ($32.0 million + $14.8 million + $39.6 million) - ($20.8 million + $24.8 million + $11.8 million)

= $86.4 million - $57.4 million

= $29 million