On its December 31st balance sheet,LCG Company reported gross fixed assets of $6,500,000 and net fixed assets of $5,000,000.Depreciation for the year was $500,000.Net fixed assets a year earlier on December 31st,had been $4,700,000.What figure for "Cash Flows Associated with Long-Term Investments (Fixed Assets)" should LCG report on its Statement of Cash Flows for the current year?
A) $500,000
B) $600,000
C) $700,000
D) $800,000
E) $900,000

Question

Quizplus · Accepted Answer

The cash flows associated with long-term investments (fixed assets) can be calculated by considering the change in net fixed assets, adjusted for depreciation. The net fixed assets increased from $4,700,000 to $5,000,000, a change of $300,000. However, depreciation reduces net fixed assets, so to find the actual cash spent on fixed assets, we add back the depreciation of $500,000 to the change in net fixed assets. Therefore, $300,000 + $500,000 = $800,000 is the correct figure for cash flows associated with long-term investments.

On Its December 31st Balance Sheet,LCG Company Reported Gross Fixed