Question

Given the amounts below, calculate the Total Cash from (for) Investing Activities on the Statement of Cash Flows.

Cash Collected from Customers	$200,000
Issuance of Stock	$120,000
Purchase of Equipment	$25,000
Proceeds from Sale of Land	$80,000

= ________

Why is Accumulated Depreciation on the balance sheet more than Depreciation Expense on the income statement in the subsequent years of an asset's useful life?

		The company must have neglected to close its temporary accounts in the prior accounting periods.
		Accumulated Depreciation is the dollar amount of life the asset has left.
		The company must have adjusted the useful life of the asset.
		Accumulated Depreciation accumulates and reports all of the asset's usefulness used since the asset was purchased.

Which statement about depreciation is true?

		Depreciation means loss in economic value.
		Depreciation means to capitalize a cost over several accounting periods.
		Depreciation refers to an allocation of an asset’s cost to an expense account.
		Depreciation means to increase net income by transferring balances from shareholders’ equity.
		None of these is true.

Answer 1

1)

Cash flow from investing activities
Proceeds from sale of land	80000
Purchase of equipment	(25000)
Net cash flow from investing activities	55000

# Cash Collected from Customers is a part of operating activity and Issuance of Stock is a part of financing activity.

2)Correctoption is " Accumulated Depreciation accumulates and reports all of the asset's usefulness used since the asset was purchased "

Accumulated depreciation shows the amount of total depreciation on asset since the date of purchase where as depreciation expense shows the amount of decline in value of asset for a particular period.

3)Correct option is " Depreciation refers to an allocation of an asset’s cost to an expense account "

Depreciation is a decline in value of asset due to use or time .The cost of asset purchased is depreciated over the useful life of asset whch is charged to depreciation expense .