Question

In 2018, Anderson Company purchased equipment for $372,000 and also sold some special purpose machinery with...

In 2018, Anderson Company purchased equipment for $372,000 and also sold some special purpose machinery with a book value of $158,600 for $186,500. In its statement of cash flows for 2018, Anderson should report the following with respect to the above transactions:

  • a) $185,500 net cash used by investing activities.

  • b) $185,500 net cash used by investing activities; $27,900 net cash provided by operating activities.

  • c) $372,000 net cash used by investing activities.

  • d) $372,000 cash used by investing activities; $186,500 cash provided by financing activities.

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Answer #1

Activities that include sale or purchase of fixed assets and investments are included in Cash Flows from Investing activities.

Purchase equipment for $372,000 shall be cash outflow in investing activities.

Sale equipment for $186,500 shall be cash inflow from investing activities, as cash inflow will be reported in investing activities.

So, cash outflow for Purchase equipment -$372,000

cash inflow from sale equipment 186,500

__________

Net cash used in investing activities -185500

________

So, Answer is a. Net cash used by investing activities $185,500.

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