Sale of short-term stock investments $8,500 Cash collections from customers 21,300 Purchase of...

Question:

Sale of short-term stock investments $8,500

Cash collections from customers 21,300

Purchase of used equipment 6,600

Depreciation expense 2,700

Compute cash flows from investing activities using the above company information. (Amounts to be deducted should be indicated by a minus sign.)

Cash Flow Statement:

The cash flow statement is prepared for operating activities, investing activities, and financing activities. The cash flow from investing and financing activities are prepared under the direct method only.

Answer and Explanation:

The net cash flows from investing activities is $1,900.

Explanation: The net cash flows from investing activities is $1,900 ($8,500 - $6,600), which has been computed by deducting the cash used in purchasing used equipment from the cash received from the sale of short-term investment.

Note: cash collection from customers is an operating activity and depreciation expense is a non-cash operating expense.


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Using the Statement of Cash Flows for Decision Making

from Accounting 101: Financial Accounting

Chapter 12 / Lesson 5
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