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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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During 20X1, Craig Company had the following transactions:

  1. a. Purchased $300,000 of 10-year bonds issued by Makenzie Inc.
  2. b. Acquired land valued at $105,000 in exchange for machinery.
  3. c. Sold equipment with original cost of $810,000 for $495,000; accumulated depreciation taken on the equipment to the point of sale was $270,000.
  4. d. Purchased new machinery for $180,000.
  5. e. Purchased common stock in Lemmons Company for $82,500.

Required:

  1. 1. Prepare the net cash from investing activities section of the statement of cash flows.
  2. 2. CONCEPTUAL CONNECTION Usually, the net cash from investing activities is negative. How can Craig cover this negative cash flow? What other information would you like to have to make this decision?

1.

To determine

Construct the section of cash from investing cash flows from the statement of cash flows.

Explanation

Cash Flows from Investing Activities:

This category of a cash flow statement shows the investing activities which involves the purchase or sale of long-term assets. This includes acquiring new asset or acquiring stock in another company.

The calculation of investing cash flows for the current year is shown in table below:

C Company
Cash Flow Statement
For the year ended 20X1
ParticularsAmount ($)
Cash flows from investing activiti...

2.

To determine

Explain the manner in which the C Company can cover the negative cash flow. Also, explain the other information required to make the decision.

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