Question

Selected information from Large Corporation's accounting records and financial statements for 2013 is as follows ($ in millions): Cash paid to acquire a patent $48 Treasury stock purchased for cash 45 Proceeds from sale of land and buildings 75 Gain from the sale of land and buildings 46 Investment revenue received 15 Cash paid to acquire office equipment 70 Large prepares its financial statements in accordance with IFRS. In its statement of cash flows, Large most likely reports net cash outflows from investing activities of:a. $28 million.b.$48 million.c.$118 million.d.$58 million.

Answer 1

Answer:

Net Cash outflow from investing activities = $28 million

Explanation:

Investing activities are the activities in nature to acquire/sell assets, which will generate future economic benefits, and income thereof from such assets.

Out of the above provided information, following are investing activities

1. Cash paid to acquire a patent $48
2. Proceeds from sale of land and buildings $75
3. Investment revenue received $15
4. Cash paid to acquire office equipment $70

Net Cash outflow from investing activities = $48 - $75 - $15 + $70 =  $28 million

Note:

1. Treasury stock is purchase of own equity from market thus is a part of financing activity.
2. Proceeds from sale of land and building is to be considered and the net gain from such transaction is deducted from operating income in cash flow statement.
3. Cash paid to acquire office equipment is for future long term benefit and is part of investing activity.

Net Cash outflow from investing activities = $28 million