Podcast
Questions and Answers
What accounts are primarily affected by investing activities?
What accounts are primarily affected by investing activities?
How much cash did ShopMart pay to purchase plant assets?
How much cash did ShopMart pay to purchase plant assets?
What is shown as an outflow of cash in the investing activities section?
What is shown as an outflow of cash in the investing activities section?
What was the cash receipt from the sale of plant assets?
What was the cash receipt from the sale of plant assets?
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Which statement accurately describes the net cash from investing activities?
Which statement accurately describes the net cash from investing activities?
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Study Notes
Cash Flows from Investing Activities
- Investing activities affect long-term assets like plant assets, investments, and notes receivable.
- ShopMart's balance sheet (Exhibit F:14-3) shows these.
- T-accounts help evaluate if there was an acquisition or disposal for each long-term asset.
- Beginning and ending balances for each account are from the comparative balance sheet.
- Depreciation expense is included in the Accumulated Depreciation account (from the income statement).
- Information about acquisitions and disposals is from additional data.
Example
- ShopMart purchased $310,000 in plant assets using cash.
- Sold plant assets with a cost of $55,000 and accumulated depreciation of $15,000, generating a $10,000 gain.
- ShopMart paid $310,000 cash for plant assets (outflow).
- To find the cash received from the disposal of plant assets, recreate the journal entry and solve for the missing cash amount.
- $50,000 cash was received from the sale of plant assets (inflow).
- Net cash from investing activities is the net cash used for investing activities (outflow).
Determining Cash Flow
- Use information from the balance sheet and income statement to calculate the change to long-term assets.
- Net cash from investing activities is calculated.
- Investing activities are reported after operating activities in the statement of cash flows.
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Description
Test your knowledge on cash flows related to investing activities, including the impact on long-term assets such as plant assets and investments. This quiz will help you understand acquisition and disposal processes, as well as the importance of depreciation in evaluating cash flows. Use T-accounts and balance sheets to analyze ShopMart's financial activities effectively.
