In 2017,Valencia Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000.In its statement of cash flows for 2017,Valencia should report the following with respect to the above transactions:

Question

Quizplus · Accepted Answer

The purchase of equipment for $363,000 is an investing activity which requires cash outflow, therefore it should be reported as a net cash used by investing activities. Likewise, the sale of machinery for $182,000 is also an investing activity which provides cash inflow, but the book value of the machinery is irrelevant in the cash flow statement. Therefore, the net effect of these transactions is a cash outflow of $181,000, which should be reported as such in the statement of cash flows. There is no indication of any cash provided or used by financing or operating activities in this scenario.

In 2017,Valencia Company Purchased Equipment for $363,000 and Also Sold