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During Year 1, El Paso Company had the following changes in account balances:

The Accumulated Depreciation account had a beginning balance of $25,000 and an ending balance of $35,000. The increase was due to depreciation expense.
The Long-Term Notes Payable account had a beginning balance of $40,000 and an ending balance of $15,000. The decrease was due to repayment of debt.
The Equipment Account had a beginning balance of $25,000 and an ending balance of $92,500. The increase was due to the purchase of other operational assets.
The Long-Term Investments Account (Marketable Securities) had a beginning balance of $18,000 and an ending balance of $12,500. The decrease was due to the sale of investments at cost.
The Dividends Payable account had a beginning balance of $12,000 and an ending balance of $10,000. There were $20,000 of dividends declared during the period.
The Interest Payable account had a beginning balance of $2,250 and an ending balance of $1,250. The difference was due to the payment of interest.

-What is the net cash flow from investing activities?
A)$62,000 outflow
B)$62,000 inflow
C)$67,500 outflow
D)$73,000 outflow

Question

[The following information applies to the questions displayed below.]

During Year 1, El Paso Company had the following changes in account balances:

The Accumulated Depreciation account had a beginning balance of $25,000 and an ending balance of $35,000. The increase was due to depreciation expense. 
The Long-Term Notes Payable account had a beginning balance of $40,000 and an ending balance of $15,000. The decrease was due to repayment of debt. 
The Equipment Account had a beginning balance of $25,000 and an ending balance of $92,500. The increase was due to the purchase of other operational assets. 
The Long-Term Investments Account (Marketable Securities) had a beginning balance of $18,000 and an ending balance of $12,500. The decrease was due to the sale of investments at cost. 
The Dividends Payable account had a beginning balance of $12,000 and an ending balance of $10,000. There were $20,000 of dividends declared during the period. 
The Interest Payable account had a beginning balance of $2,250 and an ending balance of $1,250. The difference was due to the payment of interest.

-What is the net cash flow from investing activities?
A)$62,000 outflow
B)$62,000 inflow
C)$67,500 outflow
D)$73,000 outflow

Quizplus · Accepted Answer

Cash flows reported as investing activities include cash receipts (inflows)from selling property,plant,equipment,or marketable securities,as well as collections from credit instruments such as notes or mortgages receivable and cash payments (outflows)for purchasing property,plant,equipment,or marketable securities,as well as for making loans to borrowers.
Ending balance of equipment of $92,500 = Beginning balance of equipment of $25,000 + Increase due to purchase of equipment (the unknown)- Decrease due to cost of equipment sold of $0
Outflow for purchase of equipment = $92,500 -$25,000 = $67,500
Ending balance of long-term investments of $12,500 = Beginning balance of long-term investments of $18,000 + Increase due to purchase of long-term investments of $0 - Decrease due to cost of long-term investments (the unknown)
Decrease due to cost of long-term investments sold = $18,000 - $12,500 = $5,500
The long-term investments were sold at cost,thus $5,500 is the inflow.
Net cash outflow from investing activities = $67,500 (outflow)- $5,500 (inflow)= $62,000

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