Question

Cash Flows from Investing Activities

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

Hayashi provided the following comparative balance sheets:

Hayashi, Inc. Comparative Balance Sheets At December 31, 20X1 and 20X2
	20X1	20X2
Long-Term Assets
Plant and equipment	$1,000,000	$1,025,000
Accumulated depreciation	(500,000)	(525,000)
Land	500,000	711,750

Required:

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

Answer 1

Solution:
	Statement of Cash Flows - Indirect Approach
		Amount in	Amount in
	Cash flows from investing activities
	Purchase of Machinary	$                      -2,25,000
	Sale of Machinary	$                        1,75,000
	Purchase of Land	$                      -2,11,750
	Net cash used in investing activities		$                  -2,61,750
	Cash and cash equivalents at end of period		$                  -2,61,750
	Calculation of Purchase of Machinary in Cash
	Beginning Balance	$                      10,00,000
	Less: Machinary Sold	$                        2,25,000
	Net Balance (A)	$                        7,75,000
	Ending Balance of Equipment (B)	$                      10,00,000
	Purchase of Machinary (B-A)	$                        2,25,000