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 10,000Purchase 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) 75,000In its December 31, statement of cash flows , what amount should Reve report as net cash used in investing activities?a. $170,000 b. $176,000 c. $188,000d. $194,000Choice "a" is correct. Investing activities include acquisitions and sales of long-term assets or investmentassets. Cash used equals $170,000 ($180,000 paid less $10,000 received from the sale of the equipment).

Answer 1

Answer:

what amount should Reve report as net cash used in investing activities?

a. $170,000

Explanation:

It will be the proceeds from the sale of equipment 10,000

notice we are following the cash in the cash flow statment, regardless of the amount earned or loss, we will post the cash received from the sale.

And the purchase of AS Inc. Bonds 180,000

those bonds have a face value of 200,000

but were purchase at 180,000

That is the amount we should use in the cash flow statment.

The carrying value of the bonds is not relevant.