Cash Flows from Investing Activities During the year, equipment with a book valu

Question

Cash Flows from Investing Activities

During the year, equipment with a book value of $125,000 was sold for $175,000 (original purchase cost of $225,000). New equipment was purchased.

Murray Company provided the following comparative balance sheets:

Required:

Calculate the investing cash flows for the current year. Use a minus sign to indicate a cash outflow.
$

Murray Company
Comparative Balance Sheets
At December 31, 2013 and 2014 Long-Term Assets 2013 2014 Plant and equipment $1,000,000 $1,025,000 Accumulated depreciation (500,000) (525,000) Land 500,000 744,750

Explanation / Answer

investing cash flows for the current year

1. Investment Sold = $175,000

2. Land Purchesed = (744750-500000) = - $244750

3. Equipment Purchased = - $250000

Net Cash Flow = - $319750

note :

Equipment Purchased = Book Value at the end of 2014 - (book value at end of 2013-book value of equipment sold)

= $(1025000-(1000000-225000) = $250000

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