Question

Fama Corp sold some plant assets during 2020 for $265,000. The original cost to Fama of...

Fama Corp sold some plant assets during 2020 for $265,000. The original cost to Fama of these assets was $1,830,000. The accumulated depreciation on these particular assets was $1,350,000 at December 31, 2019, and was $1,500,000 at the time of the sale in 2020.

Fama uses the indirect method for its statement of cash flows. In reconciling net income to cash flows from operations, what is the net effect (i.e., addition or subtraction) stemming from these plant assets for the year ended December 31, 2020?

$0 (No effect on the reconciliation of net income to cash flows from operations)

$85,000 decrease

$65,000 increase

$85,000 increase

$150,000 increase

$215,000 increase

Refer to the scenario in question 1 . What is the net effect on cash flows from investing activities for the year ended December 31, 2020, stemming from these plant assets?

$0 (No effect on cash flows from investing activities

$85,000 decrease

$200,000 increase

$265,000 increase

$330,000 increase

Refer to the scenario in question 1. What is the net effect on cash flows from financing activities for the year ended December 31, 2020, from these plant assets?

$0 (No effect on cash flows from financing activities)

$85,000 decrease

$85,000 increase

$200,000 increase

$265,000 increase

$330,000 increase

Homework Answers

Answer #1

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