Question

Creative Sound Systems sold investments, land, and its own common stock for $40 million, $16 million, and $42 million, respectively. Creative Sound Systems also purchased treasury stock, equipment, and a patent for $22 million, $26 million, and $13 million, respectively. What amount should the company report as net cash flows from investing activities?

Answer 1

Answer:

$17 million

Explanation:

Statement of cash flows show the cash generated and cash expended by the entity in a given accounting period.

In showing the inflow and outflow of cash, activities are grouped into three sections: operating, investing and financing activities.

Operating activities deals with cash generated and expended in the business normal operation, investing activities analyses the inflow and outflow of cash relating to acquisition and disposal of asset and investment and financing activities show the cash activities relating to provider of capital. Under each section, the net cash flow is derived by deducting outflow from inflow. After this, the subtotal for each section is net off and added to the opening of cash for the period in order to arrive at the closing cash balance for the period.

Against this background, the net cash flows from investing activities is :

                                              Creative Sound System

Cash flow from investing activities   Amount ($M)                      Amount ($M)

Sales of Investment                                 40

Sales of Land                                            16      

Purchase of equipment                           (26)

Purchase of patent                                   (13)

Net cash flow from investing activities                                               17