In preparing its cash flow statement for the year ended December 31, 2016, Red C
ID: 2500305 • Letter: I
Question
In preparing its cash flow statement for the year ended December 31, 2016, Red Co. gathered the following data:
Gain on sale of land $ 12,400
Proceeds from sale of land 22,000
Purchase of Blue, Inc., bonds (face value $216,000) 358,000
Amortization of bond discount 4,600
Cash dividends declared 98,000
Cash dividends paid 73,000
Proceeds from sales of Red Co. common stock 156,000
In its December 31, 2016, statement of cash flows, what amount should Red report as net cash outflows from investing activities?
Explanation / Answer
Answer:
Red report's net cash outflows from investing activities = Purchase of Blue, Inc., bonds - Proceeds from sale of land
= 358,000 - 22,000 = $336,000
Should appear in investing activities of cash flow Reason Gain on sale of land $ 12,400 No Full cash proceeds are shown instead of gain. Proceeds from sale of land 22,000 Yes Sale of an asset. Purchase of Blue, Inc., bonds (face value $216,000) 358,000 Yes Purchase of an investment. Amortization of bond discount 4,600 No It is a non cash transaction. Cash dividends declared 98,000 No It is a financing activity. Cash dividends paid 73,000 No It is a financing activity. Proceeds from sales of Red Co. common stock 156,000 No It is a financing activity.