Please give basic explanations and formulae wherever necessary. Q1. Financial ac
ID: 2343939 • Letter: P
Question
Please give basic explanations and formulae wherever necessary.
Q1.
Financial accounting - Financing activities :
Q2.
Financial accounting - Investing activities :
Mercedes issued common stock for $320,000 on the first day of 2005. It bought fixed-assets for $160,000 and inventory for $65,000. Late in the year, it sold fixed assets for their book value of $ 20,000. It sold one-half the inventory for $55,000 during the year. On December 15, the company used excess cash of $60,000 to purchase common stock of BMW company which Mercedes regarded as a long-term investment.
Prepare a statement of cash flows from investing activities for mercedes.
Explanation / Answer
Cash flows from financing activities
================================
Retirement of long term debt ($160,000) Cash paid
Issuance of long term debt $200,000 Cash received
Paid for common shares ($35,000) Cash paid
Dividend paid ($11,000) Cash paid
Cash flows from financing activities ($6,000)
Financial accounting - Investing activities :
Cash flows from investing activities
================================
Purchase of Fixed assets ($160,000) Cash Paid
Sale of fixed assets $20,000 Cash received
Purchase of inventory Operating activities
Sale of inventory Operating activities
Investment in BMW ($60,000) Cash paid for shares
Cash flows from
investing activities ($200,000)