Question

Balance Sheet: Dec. 31, 2018 Dec. 31, 2017 Investments, long-term $ 1,200,000 $ 965,000 Income Statement: 2018 Gain on sale of long-term investments 26,000 During the year, the company sold long-term investments for $80,000 cash. In the statement of cash flows, the investing activities section should show a cash disbursement for "purchases of long-term investments" for $____

Answer 1

Answer:

$289,000

Explanation:

The journal entry for sale of investment for profit is:

Bank A/C                                                       Dr.  

    To Investments A/C

    To Gain on sale of investments

(Being investments sold and profit realized being recorded)

Purchase of Investments during the year = Investments closing balance + Amount of investments sold - Investments opening balance - Gain on sale of investments

Investments purchased during the year = $1,200,000 + 80,000 - 965,000 - 26000

Investments purchased during the year = $289,000

Investments account is an asset account. A debit to such an account increases it's balance and a credit reduces it's balance.