Jarvis, Inc. reported net income of $44,000 for the year ended December 31, 2015 Included in net income were depreciation expense of $8,400 and a gain on sale of equipment of $1,700. The equipment had an historical cost of $40,000 and accumulated depreciation of $24,000. Each of the following accounts increased during 2015: $$\begin{array} { l l }
\text { Patents } & \$ 5,500 \
\text { Prepaid rent } & \$ 6,800 \
\text { Available-for-sale securities } & \$ 1,000 \
\text { Bonds payable } & \$ 5,000
\end{array}$$ What is the amount of cash provided by or used by investing activities for Jarvis, Inc. for the year ended December 31, 2015?
A) ( $ 4,800)
B) $16,700
C) $11,200
D) $12,200

Question

Jarvis, Inc. reported net income of $44,000 for the year ended December 31, 2015 Included in net income were depreciation expense of $8,400 and a gain on sale of equipment of $1,700. The equipment had an historical cost of $40,000 and accumulated depreciation of $24,000. Each of the following accounts increased during 2015: $$\begin{array} { l l } 
\text { Patents } & \$ 5,500 \
\text { Prepaid rent } & \$ 6,800 \
\text { Available-for-sale securities } & \$ 1,000 \
\text { Bonds payable } & \$ 5,000
\end{array}$$ What is the amount of cash provided by or used by investing activities for Jarvis, Inc. for the year ended December 31, 2015?
A) ( $ 4,800)
B) $16,700
C) $11,200
D) $12,200

Quizplus · Accepted Answer

The cash flow from investing activities includes the cash received from the sale of equipment. The equipment's book value was $16,000 ($40,000 cost - $24,000 accumulated depreciation). The gain on sale was $1,700, so the cash received was $17,700 ($16,000 book value + $1,700 gain). The increase in patents ($5,500) is a cash outflow. Therefore, the net cash provided by investing activities is $17,700 - $5,500 = $12,200.

Jarvis, Inc What Is the Amount of Cash Provided by or Used