[Anonymous]

Becker Question –

In preparing its cash flow statement for the year ended December 31, Reve Co. collected the following data:

Gain on sale of equipment $ (6,000)
Proceeds from sale of equipment 10,000
Purchase of A.S., Inc. bonds (par value $200,000) (180,000)
Amortization of bond discount 2,000
Dividends declared (45,000)
Dividends paid (38,000)
Proceeds from sale of Treasury stock (carrying amount $65,000) 75,000

In its December 31, statement of cash flows, what amount should Reve report as net cash used in investing activities?

a. $188,000
b. $176,000
c. $194,000
d. $170,000

The correct answer is d. I understand that proceeds from sales of equipment and purchase of bonds belong into the investing section. But, aren’t gains and losses are adjusted out of the operating activities and moved into investing activities? Why isn’t the correct answer b?

Thanks!

 

 

[UCMCPA]

The answer is NOT b because the 10,000 proceeds from the sale of the equipment already has the 6,000 gain in it. You are double counting if you add back in the gain. The gain will be a deduction from the operating section

FAR - 84
AUD - 94
REG - 86
BEC - 86

[UCMCPA]

The answer is NOT b because the 10,000 proceeds from the sale of the equipment already has the 6,000 gain in it. You are double counting if you add back in the gain. The gain will be a deduction from the operating section

FAR - 84
AUD - 94
REG - 86
BEC - 86

[Anonymous]

Thank you! That makes perfect sense!

[Anonymous]

Thank you! That makes perfect sense!

[Author]

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