Question

A company had the following cash flows for the year:(a) Purchased land, $60,000(b) Borrowed from a local bank, $100,000(c) Increase in salaries payable, $50,000(d) Issued common stock, $75,000(e) Paid dividends, $20,000(f) Sold equipment, $40,000(g) Increase in accounts receivable, $120,000What amount would be reported for net investing cash flow

Answer 1

Answer:

Net investing activities result in -$20,000

Explanation:

The net investing cash flow can be calculated thus:

Purchase of land                   ($60,000)

Sale of equipment                 $40,000

Net investing cash flow         ($20,000)

The borrowed from the bank,issue of common stock as well as payment of dividends to shareholders  are all financing activities.

On other hand,increase in salaries payable and increase in accounts receivable relate net working capital which belong to operating activities of the firm

The only investing activities are purchase of land and sale of equipment