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.

Question

Business

Greyson Mckee

26 July, 12:02

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.

+3

Answers (1)

Know the Answer?

Rhianna Craig · Answer 1

c. outflow of $88,000.

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.