OS 12-12 (Algo) Computing cash flows from investing LO P3 Sale of investments Cash collections from customers Cash purchase of used equipment Depreciation expense Investing Activities $5,400 14,200 Compute cash flows from investing activities using the above company Information. (Amounts to be deducted should be indicated by a minus sign.) $ 4,700 1,700 0
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
![**Title: Computing Cash Flows from Investing Activities**
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To accurately determine the cash flows from investing activities, we must examine the financial transactions related to investments made by a company. Below is a breakdown of relevant cash flows:
1. **Sale of Investments**: This is the cash inflow obtained from selling investment assets. In this case, the amount is **$5,400**.
2. **Cash Collections from Customers**: Although relevant for operational cash flow calculations, this item, amounting to **$14,200**, is not part of investing activities.
3. **Cash Purchase of Used Equipment**: This represents a cash outflow, as it involves spending cash to acquire equipment. The amount here is **$4,700**.
4. **Depreciation Expense**: This is a non-cash charge representing the wearing out or usage of fixed assets. It amounts to **$1,700**, but since it's non-cash, it is not directly included in the cash flow from investing activities.
### Calculation
To compute cash flow from investing activities, consider only relevant inflows and outflows:
- **Cash Inflows**:
- Sale of Investments: **$5,400**
- **Cash Outflows**:
- Cash Purchase of Used Equipment: **($4,700)**
**Net Cash Flow from Investing Activities:**
\[ \text{Net Cash Flow} = \text{Sale of Investments} - \text{Cash Purchase of Used Equipment} \]
\[ \text{Net Cash Flow} = \$5,400 - \$4,700 = \$700 \]
Summary: The net cash flow from investing activities for this company amounts to **$700**.
**Graphical Representation:**
The image includes a table titled "Investing Activities" where these values and calculations would typically be inserted. The final row displays the net cash flow, calculated as zero in the image before adjustments.
*Note: Negative values, indicated by parentheses, represent cash outflows.*
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This guide offers a structured approach to understanding and calculating cash flows from investing activities, crucial for financial analysis and planning.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3881c1a6-f287-42d9-8e45-c704abc4145f%2F306d911a-8eb7-45bb-a86d-e5b0ad08dc63%2Fxymrdm9_processed.jpeg&w=3840&q=75)
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It says the cash from collection from customers part is incorrect so is (4,700) & the 700 part
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