Question

Awesome Inc. Statement of financial position As at December 31 20X8 20X7 Accounts receivable $ 160,000 $ 110,000 Inventory 62,000 50,000 Prepaid expenses 3,000 4,000 Investments at FVPL 18,000 40,000 Investments at FVOCI 18,000 13,000 Property, plant and equipment (net) 80,000 100,000 Land 180,000 94,000 $ 521,000 $ 411,000 Bank overdraft $ 9,000 $ 32,000 Accounts payable 30,000 20,000 Other current liabilities 45,000 60,000 Bank loans 37,000 50,000 Bonds payable 200,000 100,000 Share capital 30,000 10,000 Retained earnings 159,000 133,000 Reserves (AOCI) 11,000 6,000 $ 521,000 $ 411,000 Awesome Inc. Statement of comprehensive income Year ended December 31 20X8 Sales $ 555,000 Depreciation expense 20,000 Interest expense 4,000 Other expenses 380,000 Operating income $ 151,000 Gain on sale of land 5,000 Loss on disposition of investment at FVPL (2,000) Net income before income tax expense $ 154,000 Income tax expense 24,000 Net income $ 130,000 Other comprehensive income 5,000 Comprehensive income $ 135,000 Additional information: ? In 20X8, Awesome Inc. issued $100,000 in bonds to acquire land having a fair value of $100,000. Module 5.1 — Intermediate Financial Reporting 1 Week 6 — Quiz 4 / 8 1. What is the amount that Awesome Inc. will report as cash from investing activities on its statement of cash flows for its year ended December 31, 20X8? a) $14,000 cash inflow b) $19,000 cash inflow c) $39,000 cash inflow d) $86,000 cash outflow

Answer 1

• Investments at FVPL

Beginning balance $ 40,000
Ending balance $ 18,000
Investment sold of $ 22,000 book value [40000 – 18000]
Since, mentioned in Income statement that investments are sold at a loss of $ 2,000, investments must have been sold for cash at $ 20,000 [$22000 book value – 2000 loss].

Cash Inflow = $ 20,000 (A)

• Land

Beginning balance = $94,000
Ending balance = $ 180,000
Land purchased through Bonds = $ 100,000

Given, gain on sale of land = $ 5,000
Hence, cash received on sale of land = 94000 + 5000 + 100000 – 180000 = $ 19,000

Cash Inflow = $ 19,000 (B)

• (A) + (B) = 20000 + 19000 = $ 39,000 Inflow
• Hence, correct answer is Option ‘c’: $ 39,000 cash Inflow