In 2009, Anderson Company purchased equipment for $363,000 and also sold some sp

Question

In 2009, Anderson Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000. In its statement of cash flows for 2009, Anderson should report the following with respect to the above transactions: A) $363,000 net cash used by investing activities. B) $181,000 net cash used by investing activities; $27,000 net cash provided by operating activities. C) $181,000 net cash used by investing activities. D) $363,000 cash used by investing activities; $182,000 cash provided by financing activities. In 2009, Anderson Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000. In its statement of cash flows for 2009, Anderson should report the following with respect to the above transactions: A) $363,000 net cash used by investing activities. B) $181,000 net cash used by investing activities; $27,000 net cash provided by operating activities. C) $181,000 net cash used by investing activities. D) $363,000 cash used by investing activities; $182,000 cash provided by financing activities. A) $363,000 net cash used by investing activities. B) $181,000 net cash used by investing activities; $27,000 net cash provided by operating activities. C) $181,000 net cash used by investing activities. D) $363,000 cash used by investing activities; $182,000 cash provided by financing activities. A) $363,000 net cash used by investing activities. B) $181,000 net cash used by investing activities; $27,000 net cash provided by operating activities. C) $181,000 net cash used by investing activities. D) $363,000 cash used by investing activities; $182,000 cash provided by financing activities.

Explanation / Answer

B)$181,000 net cash used by investing activities; $27,000 net cash provided by operating activities.

REASON :

PROFIT ON SALE OF SPECIAL PURPOSE MACHINERY = 182000-150000 = 27000

IT WILL BE SHOWN AS A DEDUCTION UNDER THE HEADING CASH FLOW FROM OPEARATING ACTIVITIES

AND THE ENTIRE SALES PROCEEDS FROM THE SALE OF SPECIAL PURPOSE MACHINERY WILL BE SHOWN AS A CASHINFLOW UNDER THE HEADING CASH FLOW FROM INVESTING ACTIVITIES

AND THE PURCHASE OF EQUIPMENT WILL BE SHOWN AS A CASHOUTFLOW UNDER THE HEADING CASH FLOW FROM INVESTING ACTIVITIES

CASH FROM OPEARATING ACTIVITIES

LESS:PROFIT ON SALE OF SPECIAL PURPOSE MACHINERY = (27000)   

CASH FLOW FROM INVESTING ACTIVITIES

a]PURCHASE OF EQUIPMENT = (363000)

b]SALE OF SPECIAL PURPOSE MACHINERY = 182000

NET CASH OUTFLOW FROM INVESTING ACTIVITIES 181000

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