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JYD Company reported net income of P3,000,000 for the current year
JYD Company reported net income of P3,000,000 for the current year. Changes occurred in certain accounts as follows:
Equipment P250,000 increase
Accumulated depreciation 400,000 increase
Note payable 300,000 increase
During the year, the entity sold equipment costing P250,000 with accumulated depreciation of P120,000 for a gain of P50,000. In December of the current year, the entity purchased equipment costing P500,000 with P200,000 cash and a 12% note payable of P300,000. In the statement of cash flows, what amount should be reported as net cash used in investing activities?
Group of answer choices c. P3,520,000 b. P3,470,000 d. P3,570,000 a. P3,400,000
Expert Solution
In a statement of cash flows, cash flows from investing activities section provides details on the cash generated by or used in investment activities of the business such as purchase and sale of equipment etc.
In the case in question, equipment costing P250,000 with accumulated depreciation P120,000 is sold at a gain of P50,000.
So, carrying value of equipment = P250,000 – P120,000 = P130,000
Cash proceeds from sale of equipment = Carrying value + Gain on sale
= P130,000 + P50,000
= P180,000
Therefore, cash proceeds from sale of equipment = P250,000
Further, equipment costing P500,000 is purchased but cash purchase amounts to P200,000.
So, the investing section of statement of cash flows will appear as follows:
|
Cash generated from (used in) investing activities |
Amount |
|
Sale of equipment |
P180,000 |
|
Purchase of equipment |
(P200,000) |
|
Net cash used in investing activities |
(P20,000) |
So, the net cash used in investing activities will be P20,000
Kindly re-check the options, They may pertain to some other question.
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