An analysis of the machinery accounts of Noller Company for 2015 is as follows:
ID: 2455165 • Letter: A
Question
An analysis of the machinery accounts of Noller Company for 2015 is as follows: Machinery, Net of Accumulated Accumulated Machinery Depreciation Depreciation Balance at January 1, 2015 $500,000 $125,000 $375,000 Purchases of new machinery in 2015 for cash 200,000 — 200,000 Depreciation in 2015 — 100,000 (100,000 ) Balance at Dec. 31, 2015 $700,000 $225,000 $475,000 The information concerning Noller's machinery accounts should be shown in Noller's statement of cash flows (indirect method) for the year ended December 31, 2015, as a(n)
a. $100,000 increase in cash flows from financing activities.
b. subtraction from net income of $100,000 and a $200,000 decrease in cash flows from financing activities.
c. addition to net income of $100,000 and a $200,000 decrease in cash flows from investing activities.
d. $200,000 decrease in cash flows from investing activities.
Explanation / Answer
c) Addition to net income of $100,000 and a $200,000 decrease in cash flows from investing activities.
Explanation:
Investing activities Purchases of new machinery cash is paid out it means going out. It reduces cash flow $200,000 and In, Profit and loss account we can less depreciation but cash flow analysis depreciation is added back to net income $100,000.