The ChoCho Company entered into the following transactions during 2017: 1. The c

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

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