During Year 1, El Paso Company had the following changes in account balances: The Accumulated Depreciation account had a beginning balance of $87,500 and an ending balance of $122,500. The increase was due to depreciation expense.The Long-Term Notes Payable account had a beginning balance of $140,000 and an ending balance of $75,000. The decrease was due to repayment of debt.The Equipment Account had a beginning balance of $125,000 and an ending balance of $327,500. The increase was due to the purchase of other operational assets.The Long-Term Investments Account (Marketable Securities)had a beginning balance of $90,000 and an ending balance of $62,500. The decrease was due to the sale of investments at cost.The Dividends Payable account had a beginning balance of $60,000 and an ending balance of $50,000. There were $100,000 of dividends declared during the period.The Interest Payable account had a beginning balance of $11,250 and an ending balance of $6,250. The difference was due to the payment of interest.What is the net cash flow from investing activities?
A)$175,000 outflow
B)$175,000 inflow
C)$210,000 inflow
D)$210,000 outflow

Question

Quizplus · Accepted Answer

To calculate the net cash flow from investing activities, we need to look at the changes in the Equipment and Long-Term Investments accounts.

The increase in the Equipment account from $125,000 to $327,500 indicates a cash outflow of $202,500 (increase in assets).

The decrease in the Long-Term Investments account from $90,000 to $62,500 indicates a cash inflow of $27,500 (decrease in assets).

Therefore, the net cash flow from investing activities is ($202,500 - $27,500) = $175,000 outflow.

During Year 1, El Paso Company Had the Following Changes