Jamie Bleay Law Ltd.'s policy is to report all cash inflows from interest and dividends in the investing section and cash outflows arising from interest and dividends in the financing section.Jamie Bleay Law's activities for the year ended December 31,2016 included the following:
• Sold a held-for-trading investment for $11,000.The book value of this investment,which was designated as a cash equivalent,was $11,000.
• Sold an available-for-sale investment for $14,000.The book value of the investment was $14,000.
• Borrowed $120,000 from the bank for investment purposes.
• Sold equipment for $26,000 that originally cost $20,000.The net book value of this item at time of sale was $14,000.
• Received $9,000 in interest and $7,000 in dividends on sundry investments.
• Paid $4,000 interest on the investment loan.
• Acquired land and buildings valued at $700,000 by paying $200,000 cash and issuing ordinary shares for the balance.
• Bought $550,000 in bonds at a premium,paying $560,000 cash.
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 Jamie Bleay Law Ltd.'s policy is to report all cash inflows from interest and dividends in the investing section and cash outflows arising from interest and dividends in the financing section.Jamie Bleay Law's activities for the year ended December 31,2016 included the following:
• Sold a held-for-trading investment for $11,000.The book value of this investment,which was designated as a cash equivalent,was $11,000.
• Sold an available-for-sale investment for $14,000.The book value of the investment was $14,000.
• Borrowed $120,000 from the bank for investment purposes.
• Sold equipment for $26,000 that originally cost $20,000.The net book value of this item at time of sale was $14,000.
• Received $9,000 in interest and $7,000 in dividends on sundry investments.
• Paid $4,000 interest on the investment loan.
• Acquired land and buildings valued at $700,000 by paying $200,000 cash and issuing ordinary shares for the balance.
• Bought $550,000 in bonds at a premium,paying $560,000 cash.
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.