Answer: A) A net outflow of $2,000.
Explanation:
Investing Activities in the Cashflow statement refers to those transactions that have to do with capital Expenditure in the company such as the purchase or sale of Fixed Assets such as Property, Land or Equipment.
Investment cashflow also concerns transactions involving the stocks or bonds of other companies.
It is worthy of note that transactions are only recorded in the Investing Cashflow section if there is an immediate exchange of CASH.
In the books of Flow Company for the year the transactions that can be considered as Investing Activities are,
Cash paid for equipment purchase, $27,000
Cash received from sale of land with a $32,000 book value, $25,000
The acquisition of land in exchange for Preferred Stock does not fall under here as there was no immediate exchange of cash.
The Net Cash flow from Investing is therefore
= -27,000 (cash Outflow) + 25,000 (cash inflow from selling land)
= -$2,000
This means that there was a net cash Outflow of -$2,000 so Option A is correct.
