The ChoCho Company entered into the following transactions during 2017: 1. The c
ID: 2407911 • Letter: T
Question
The ChoCho Company entered into the following transactions during 2017:
1. The company was started with $22,000 of common stock issued to investors for cash.
2. On July 1, the company purchased land that cost $28,700 cash.
3. There were $400 of supplies purchased on account.
4. Company’s sales on account were $12,500.
5. Cash collections of accounts receivables were $7,500.
6. On October 1, 2017, the company paid $5,200 in advance for a 12-month insurance policy that became effective on October 1.
7. Supplies on hand as of December 31, 2017 amounted to $125.
The amount of cash flow from investing activities would be:
A. $28,700 cash in flow
B. $22,000 cash in flow
C. $28,700 cash out flow
D. $29,400 cash out flow
Explanation / Answer
The correct answer is option (C) i.e. $28,700 cash outflow.
Only purchase of Land is an investment, hence it is classified as an investing activities and the others listed are under operating and investing activities