The following information was extracted from the records of Vincent Limited: Opening balance of machinery: $840 000
Closing balance of machinery: $960 000
Cost of new machinery: $240 000
Proceeds from sale of machinery: $48 000
(Cost $120 000; Carrying amount $40 000)
The total cash flows from investing activities is determined as:
A) $48 000 cash inflow.
B) $240 000 cash outflow.
C) $192 000 cash outflow.
D) $288 000 cash inflow.

Question

Quizplus · Accepted Answer

The cash flows from investing activities include the cost of new machinery ($240 000) and the proceeds from the sale of machinery ($48 000) but subtracting the increase in the closing balance of machinery ($960 000) from the opening balance of machinery ($840 000), we can see that there was an additional cash outflow of $288 000 for the purchase of machinery. Therefore, the total cash outflow from investing activities is $240 000 + $48 000 + $288 000 = $576 000, and the answer is C, $192 000 cash outflow.

The Following Information Was Extracted from the Records of Vincent