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Chapter 23: Q2BE (page 1373)

Wainwright Corporation had the following activities in 2017:

1. Sale of land \(180,000.

4. Purchase of equipment \)415,000.

2. Purchase of inventory \(845,000.

5. Issuance of common stock \)320,000.

3. Purchase of treasury stock \(72,000.

6. Purchase of available-for-sale debt securities \)59,000.

Compute the amount Wainwright should report as net cash provided (used) by investing activities in its 2017 statement of cash flows.

Short Answer

Expert verified

The business entity used$294,000 in the investing activities.

Step by step solution

01

Definition of Investing Activities

All those activities that involve cash movement due to the purchase and sale of the fixed assets of the business entity are known as investing activities. The sale of a fixed asset is added and the purchase of fixed assets is deducted.

02

Investing activity section

Particular

Amount $

Sale of land

$180,000

Purchase of equipment

($415,000)

Purchase of available for sale securities

($59,000)

Cash used in investing activities

($294,000)

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Most popular questions from this chapter

For purposes of the statement of cash flows, under IFRS, income taxes paid are treated as:

  1. cash flows from operating activities unless they can be separately identified as part of investing or financing activities.
  2. an operating activity in all cases.
  3. an investing or operating activity, depending on whether a refund is received.
  4. either operating, financing, or investing activity, but treated consistently to other companies in the same industry.

Jobim Inc. had the following condensed balance sheet at the end of operations for 2016.

JOBIM INC.

BALANCE SHEET

DECEMBER 31, 2016

Cash \( 8,500 Current liabilities \) 15,000

Current assets other than cash 29,000 Long-term notes payable 25,500

Equity investments 20,000 Bonds payable 25,000

Plant assets (net) 67,500 Common stock 75,000

Land 40,000 Retained earnings 24,500

\(165,000 \)165,000

During 2017, the following occurred.

1. A tract of land was purchased for \(9,000.

2. Bonds payable in the amount of \)15,000 were redeemed at par.

3. An additional \(10,000 in common stock was issued at par.

4. Dividends totaling \)9,375 were paid to stockholders.

5. Net income was \(35,250 after allowing depreciation of \)13,500.

6. Land was purchased through the issuance of \(22,500 in bonds.

7. Jobim Inc. sold part of its investment portfolio for \)12,875. This transaction resulted in a gain of $2,000 for the company. No unrealized gains or losses were recorded on these investments in 2017.

8. Both current assets (other than cash) and current liabilities remained at the same amount.

Instructions

(a) Prepare a statement of cash flows for 2017 using the indirect method.

(b) Prepare the condensed balance sheet for Jobim Inc. as it would appear at December 31, 2017

For purposes of the statement of cash flows, under IFRS interest paid is treated as:

  1. an operating activity in all cases.
  2. an investing or operating activity, depending on use of the borrowed funds.
  3. either a financing or investing activity.
  4. either an operating or financing activity, but treated consistently from period to period.

What is the purpose of the statement of cash flows? What

information does it provide?

Question: Explain how the amount of cash payments to suppliers is computed under the direct method.
See all solutions

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