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Chapter 5: Q14BE. (page 239)

Martinez Corporation engaged in the following cash transactions during 2017.

Sale of land and building $191,000

Purchase of treasury stock 40,000

Purchase of land 37,000

Payment of cash dividend 95,000

Purchase of equipment 53,000

Issuance of common stock 147,000

Retirement of bonds 100,000

Compute the net cash provided (used) by investing activities.

Short Answer

Expert verified

The cash flow from investing activities is equal to $101,000.

Step by step solution

01

Definition of Investing activities

The cash flow statement reports all those activities as investing activities that include cash disbursement for purchase of a capital asset and cash receipt for sale of a capital asset.

02

Cash from investing activities

Particular

Amount $

Sale of land and building

$191,000

Purchase of land

(37,000)

Purchase of equipment

(53,000)

Cash from investing activities

$101,000

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Most popular questions from this chapter

The creditors of Chester Company agree to accept promissory notes for the amount of its indebtedness with a proviso that two-thirds of the annual profits must be applied to their liquidation. How should these notes be reported on the balance sheet of the issuing company? Give a reason for your answer

Use the information presented in BE5-14 for Martinez Corporation to compute the net cash used (provided) by financing activities.

BE5-14 (L05) Martinez Corporation engaged in the following cash transactions during 2017.

Sale of land and building $191,000

Purchase of treasury stock 40,000

Purchase of land 37,000

Payment of cash dividend 95,000

Purchase of equipment 53,000

Issuance of common stock 147,000

Retirement of bonds 100,000

Compute the net cash provided (used) by investing activities.

Aero Inc. had the following balance sheet at December 31, 2016.

LANSBURY INC.

BALANCE SHEET

DECEMBER 31, 2016

Cash

\(20,000

Account payable

\)30,000

Accounts receivables

21,200

Bond payable

41,000

Investment

32,000

Common stock

100,000

Plant assets (net)

81,000

Retained earnings

23,200

Land

40,000

\(194,200

\)194,200

During 2017, the following occurred.

1. Aero liquidated its available-for-sale debt investment portfolio at a loss of \(5,000.

2. A tract of land was purchased for \)38,000.

3. An additional \(30,000 in common stock was issued at par.

4. Dividends totaling \)10,000 were declared and paid to stockholders.

5. Net income for 2017 was \(35,000, including \)12,000 in depreciation expense.

6. Land was purchased through the issuance of \(30,000 in additional bonds.

7. At December 31, 2017, Cash was \)70,200, Accounts Receivable was \(42,000, and Accounts Payable was \)40,000.

Instructions

(a) Prepare a statement of cash flows for the year 2017 for Aero.

(b) Prepare the unclassified balance sheet as it would appear at December 31, 2017.

(c) Compute Aero鈥檚 free cash flow and current cash debt coverage for 2017.

(d) Use the analysis of Aero to illustrate how information in the balance sheet and statement of cash flows helps the user of the financial statements.

What are some of the techniques of disclosure for the balance sheet?

Refer to the definition of assets on page 204. Discuss how a leased building might qualify as an asset of the lessee (tenant) under this definition.
See all solutions

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