Question

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending Balance Beginning Balance Cash $ 102,000 $ 122,400 Accounts receivable 81,700 88,000 Inventory 109,700 100,000 Property, plant, and equipment 291,000 280,000 Less accumulated depreciation (97,000) (70,000) Total assets $ 487,400 $ 520,400 Accounts payable $ 64,000 $ 113,700 Income taxes payable 49,700 65,700 Bonds payable 120,000 100,000 Common stock 140,000 120,000 Retained earnings 113,700 121,000 Total liabilities and stockholders’ equity $ 487,400 $ 520,400

During the year Ravenna paid a $12,000 cash dividend and it sold a piece of equipment for $6,000 that had originally cost $13,800 and had accumulated depreciation of $9,200. The company did not retire any bonds or repurchase any of its own common stock during the year.

Required: What is the amount of gross cash outflows reported in the investing section of the company’s statement of cash flows? (Input the amount as positive value.)

Answer 1

Beginning Property, Plant and Equipment = $280,000
Ending Property, Plant and Equipment = $291,000
Cost of Equipment Sold = $13,800

Ending Property, Plant and Equipment = Beginning Property, Plant and Equipment + Acquisition of Property, Plant and Equipment - Cost of Equipment Sold
$291,000 = $280,000 + Acquisition of Property, Plant and Equipment - $13,800
Acquisition of Property, Plant and Equipment = $24,800

Gross Cash Outflow from Investing Activities = Acquisition of Property, Plant and Equipment
Gross Cash Outflow from Investing Activities = $24,800

So, Ravenna will report gross cash outflow of $24,800 from investing section of statement of cash flows.