Recon Cile Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section. Recon Cile's activities for the year ended December 31, 2021 included the following:
• Sold a investment at FVPL for $16,000. The book value of this investment, which was held for trading purposes was $13,000.
• Purchased an investment at FVOCI for $20,000.
• Borrowed $25,000 from the bank for investment purposes.
• Sold equipment for $21,000 that originally cost $45,000. The net book value of this item at time of sale was $25,000.
• Purchased inventory costing $4,000 for cash.
• Received $6,000 in interest and $2,500 in dividends on sundry investments.
• Acquired the right to use a forklift costing $22,000 under lease agreement.
• Acquired land and buildings valued at $400,000 by issuing ordinary shares.
• Bought $300,000 in bonds at a discount, paying $285,000 cash. The investment was classified at amortized cost.
Required:
a. Prepare the cash flows from investing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not investing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

Question

Quizplus · Accepted Answer

The Answer of Recon Cile Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section. Recon Cile's activities for the year ended December 31, 2021 included the following:
• Sold a investment at FVPL for $16,000. The book value of this investment, which was held for trading purposes was $13,000.
• Purchased an investment at FVOCI for $20,000.
• Borrowed $25,000 from the bank for investment purposes.
• Sold equipment for $21,000 that originally cost $45,000. The net book value of this item at time of sale was $25,000.
• Purchased inventory costing $4,000 for cash.
• Received $6,000 in interest and $2,500 in dividends on sundry investments.
• Acquired the right to use a forklift costing $22,000 under lease agreement.
• Acquired land and buildings valued at $400,000 by issuing ordinary shares.
• Bought $300,000 in bonds at a discount, paying $285,000 cash. The investment was classified at amortized cost.
Required:
a. Prepare the cash flows from investing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not investing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.