The following information was drawn from the year-end balance sheets of Solomon Trading Company: Account Title...

The following information was drawn from the year-end balance sheets of Solomon Trading Company:

Account Title	Year 2		Year 1
Investment securities	$	35,700	$	27,500
Equipment		233,500		212,500
Buildings		846,500		949,500
Land		83,000		65,000

Additional information regarding transactions occurring during Year 2:

Investment securities that had cost $5,090 were sold. The Year 2 income statement contained a loss on the sale of investment securities of $720.
Equipment with a cost of $40,000 was purchased.
The income statement showed a gain on the sale of equipment of $5,700. On the date of sale, accumulated depreciation on the equipment sold amounted to $7,600.
A building that had originally cost $163,500 was demolished.
Land that had cost $26,100 was sold for $21,800.

Required

Determine the amount of cash flow for the purchase of investment securities during Year 2.
Determine the amount of cash flow from the sale of investment securities during Year 2.
Determine the cost of the equipment that was sold during Year 2.
Determine the amount of cash flow from the sale of equipment during Year 2.
Determine the amount of cash flow for the purchase of buildings during Year 2.
Determine the amount of cash flow for the purchase of land during Year 2.
Prepare the investing activities section of the Year 2 statement of cash flows.

Solutions

Expert Solution

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Solomon Trading Company

1. Determine the amount of cash flow for the purchase of investment securities during Year 2
Closing Balance	35,700.00
Add: cost of securities sold	5,090.00
Less: Opening Balance	27,500.00
Cash flow for the purchase of investment securities during Year 2	13,290.00

2. Determine the amount of cash flow from the sale of investment securities during Year 2.
Cost of securities sold	5,090.00
Less: loss on sale	720.00
Cash flow from the sale of investment securities during Year 2.	4,370.00

3. Determine the cost of the equipment that was sold during Year 2.
Opening Balance	212,500.00
Add: Equipment purchased	40,000.00
Less: Closing Balance	233,500.00
Cost of the equipment that was sold during Year 2.	19,000.00

4. Determine the amount of cash flow from the sale of equipment during Year 2.
Cost of the equipment sold	19,000.00
Less: Accumulated depreciation	7,600.00
Net Book Value	11,400.00
Add: Gain on sale of equipment	5,700.00
Cash flow from the sale of equipment during Year 2.	17,100.00

5. Determine the amount of cash flow for the purchase of buildings during Year 2.
Closing Balance	846,500.00
Add: cost of building demolished	163,500.00
Less: Opening Balance	949,500.00
Cash flow for the purchase of buildings during Year 2.	60,500.00

6. Determine the amount of cash flow for the purchase of land during Year 2.
Closing Balance	83,000.00
Add: cost of land sold	26,100.00
Less: Opening Balance	65,000.00
Cash flow for the purchase of land during Year 2	44,100.00

7. Prepare the investing activities section of the Year 2 statement of cash flows.

Cash flow for the purchase of investment securities during Year 2	(13,290.00)	See Answer 1
Cash flow from the sale of investment securities during Year 2.	4,370.00	See Answer 2
Cash flow from the sale of equipment during Year 2.	17,100.00	See Answer 4
Cash flow for the purchase of buildings during Year 2.	(60,500.00)	See Answer 5
Cash flow for the purchase of land during Year 2	(44,100.00)	See Answer 6
Cash flow for the purchase of equipment during Year 2	(40,000.00)	It is given in the question
Cash flow from the sale of land during Year 2.	21,800.00	It is given in the question
Cash flow from investing activities Year 2.	(114,620.00)

ekkarill92 answered 8 months ago

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