The cash flow statement of the United Company is in process for 2015. The United Company is reporting the following balances:
$\begin{array}{lrrrr}
&12/31/14&12/31/15\
\text { Equipment } & \$ 100,000 & \$ 170,000 \
\text { Loss on sale of equipment } & 0 &10,000 \
\text { Accumulated depreciation-equipment } & 75,000 & 95,000
\end{array}$
During 2015, United sold equipment costing $30,000 for $12,000 and made several purchases of new equipment for cash.
-If these were the only investing activities,the cash flow from investing activities is a net cash

Question

The cash flow statement of the United Company is in process for 2015. The United Company is reporting the following balances:
$\begin{array}{lrrrr}
&12/31/14&12/31/15\
\text { Equipment } & \$  100,000 & \$ 170,000 \
\text { Loss on sale of equipment } & 0 &10,000 \
\text { Accumulated depreciation-equipment } & 75,000  & 95,000
\end{array}$
During 2015, United sold equipment costing $30,000 for $12,000 and made several purchases of new equipment for cash.
-If these were the only investing activities,the cash flow from investing activities is a net cash

Quizplus · Accepted Answer

The cash flow from investing activities is calculated by considering the cash spent on purchasing new equipment and the cash received from selling equipment. The net change in equipment (excluding depreciation) is $70,000 ($170,000 - $100,000), indicating purchases. The sale of equipment brought in $12,000, but there was a loss of $10,000, meaning the equipment sold for $12,000 had a book value of $22,000 ($12,000 received + $10,000 loss). The original cost of the sold equipment was $30,000, indicating a total depreciation of $8,000 ($30,000 - $22,000). Therefore, the cash spent on new equipment purchases is the net change in equipment value plus the book value of the sold equipment, which is $70,000 + $30,000 = $100,000. Subtracting the cash received from selling the old equipment ($12,000) results in a net cash outflow of $88,000 ($100,000 - $12,000) for investing activities.

The Cash Flow Statement of the United Company Is in Process