Question

A company entered into the following transactions during the year: Purchased stock for $200,000 Purchased electronic equipment for use on the manufacturing floor for $300,000 Paid dividends to shareholders of the company in the amount of $800,000 The amount to be reported in the investing activities section of the company's statement of cash flows would be

Answer 1

The correct answer is $500,000.

Purchase of Stock	$200,000
Purchase of Electronic Equipment	$300,000
Cash Flows from Investing Activities	$500,000

Purchase of Stock means investing into other companies, hence, it is investing activity and Purchase of Electronic Equipment for use is also investing activity because the asset is used as investment to generate cash flows from that asset but Payment of Dividends relates to Financing Activity because dividends are paid for the investment made by outsiders and that investment is used for financing needs to run the business, hence, it is financing activity, hence, it is not considered while calculating the cash flows from Investing Activities.

Therefore, amount to be reported in the investing section of the Cash Flows Statement is $500,000.