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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:

  1. 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.

  2. Equipment with a cost of $40,000 was purchased.

  3. 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.

  4. A building that had originally cost $163,500 was demolished.

  5. Land that had cost $26,100 was sold for $21,800.

Required

  1. Determine the amount of cash flow for the purchase of investment securities during Year 2.

  2. Determine the amount of cash flow from the sale of investment securities during Year 2.

  3. Determine the cost of the equipment that was sold during Year 2.

  4. Determine the amount of cash flow from the sale of equipment during Year 2.

  5. Determine the amount of cash flow for the purchase of buildings during Year 2.

  6. Determine the amount of cash flow for the purchase of land during Year 2.

  7. 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 1 year ago
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