Chapter 17: Problem 12
The following data are available for Orange Peels Corporation.
Short Answer
Expert verified
The net cash provided by investing activities is $120,000.
Step by step solution
01
Identify Investing Activities
Investing activities typically include transactions that pertain to the acquisition and disposal of long-term assets and investments not included in cash equivalents. From the given data, 'Sale of land', 'Sale of equipment', and 'Purchase of equipment' are considered investing activities.
02
Calculate Cash Inflows from Investing Activities
Cash inflows from investing activities include the amounts received from selling long-term assets. The sale of land amounts to 50,000. Add these amounts to find total cash inflows from investing activities:
03
Calculate Cash Outflows from Investing Activities
Cash outflows include amounts paid for purchasing long-term assets. The purchase of equipment amounts to $30,000. This is the only cash outflow related to investing activities.
04
Determine Net Cash Provided by Investing Activities
Net cash provided by investing activities is the difference between total cash inflows and total cash outflows. Subtract the cash outflow from the inflow calculated in the previous steps:
05
Select the Correct Answer
Based on the calculation, the net cash provided by investing activities is . Thus, the correct choice is: a. .
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Key Concepts
These are the key concepts you need to understand to accurately answer the question.
Cash Inflows
Cash inflows represent the money that a company receives from various activities, and in investing activities, they are particularly related to acquiring or selling long-term assets. Long-term assets can include physical items like land and equipment or financial investments. At Orange Peels Corporation, cash inflows are clear from the sale of land and equipment.
These transactions are considered inflows because they bring cash into the business, providing resources for other purposes, like funding new investments or paying down liabilities. Calculating cash inflows is a straightforward process. You simply add the amounts received from selling long-term assets.
These transactions are considered inflows because they bring cash into the business, providing resources for other purposes, like funding new investments or paying down liabilities. Calculating cash inflows is a straightforward process. You simply add the amounts received from selling long-term assets.
- Sale of land: \(100,000
- Sale of equipment: \)50,000
- Total Cash Inflows:
Cash Outflows
Cash outflows are the opposite of inflows. They occur when a company spends money, in investing activities specifically, this usually happens when purchasing long-term assets. Investing in new equipment, land, or technology means cash is leaving the business.
For Orange Peels Corporation, the purchase of equipment results in a cash outflow of \(30,000.
This event reflects an expenditure aimed at acquiring physical assets that will possibly provide future economic benefits. It is essential for businesses to keep track of such outflows, as they help in assessing the company’s financial health and planning for future investments.
For Orange Peels Corporation, the purchase of equipment results in a cash outflow of \(30,000.
This event reflects an expenditure aimed at acquiring physical assets that will possibly provide future economic benefits. It is essential for businesses to keep track of such outflows, as they help in assessing the company’s financial health and planning for future investments.
- Purchase of equipment: \)30,000
Net Cash Flow
The net cash flow from investing activities is an important financial metric that shows how much cash a company generates or spends through its investing activities during a specific time period. To calculate this, you subtract the total cash outflows from the total cash inflows.
In the context of Orange Peels Corporation, we have the following calculations:
In the context of Orange Peels Corporation, we have the following calculations:
- Total Cash Inflows: \(150,000
- Total Cash Outflows: \)30,000
- Net Cash Flow: