Question

Dunbarn Co. had the following activities during the year: Purchase of inventory $120,000 Purchase of equipment 80,000 Purchase of available-for-sale securities 60,000 Purchase of treasury stock 70,000 Issuance of common stock 150,000 What amount should Dunbarn report as cash provided (used) by investing activities in its statement of cash flows for the year?

Answer 1

Answer:

cash used by investing activities 60,000

Explanation:

Operating:

purchase of inventory  (120,000)

Investing:

acquisition of available-for-sale securities:  (60,000)

Financing:

Issuance of common stock 150,000

Purchase of treasury stock (70,000)

The investing activities will be those which represent a use of cash in securities, shares and note receivables and the cash inflow generate from this investment.

Answer 2

Answer:

cash outflow from investing activities = $140,000

Explanation:

Cash flows are divided into three main areas:

1. operating activities: includes purchase of inventory $120,000
2. financing activities: stock repurchases $70,000 and issuance of common stock $150,000
3. investing activities: include purchase of equipment $80,000 + purchase of available for sale securities $60,000 = $80,000 + $60,000 = $140,000 cash outflow