Chapter 13, Problem 13.31BE

Classify sustainable activities’ effect on cash flows (Learning Objectives 1, 2, & 3)

SUSTAINABILITY

The Plastic Lumber Company, Inc. (PLC) is a manufacturer that takes in post-consumer plastics (i.e., empty milk jugs) and recycles those plastics into a “plastic lumber” that can be used to build furniture, decking, and a variety of other items. Because Plastic Lumber has a strong focus on sustainability, the company managers try, whenever possible, to use recycled materials and to invest in sustainable projects.

Last year, the company engaged in several sustainable practices that have an impact on its cash flows. For each of the transactions listed below, indicate whether the transaction would have affected the operating, investing, or financing cash flows of the company. Additionally, indicate whether each transaction would have increased (+) or decreased (−) cash.

Transactions:

1. 1. PLC became a minority partner in a wind-turbine project by investing $2 million in cash in the project.
2. 2. A new delivery truck that uses biofuel was purchased for cash.
3. 3. PLC built a new building for its manufacturing facility. The new building is LEED certified and was paid for with cash.
4. 4. PLC sold plastic scrap generated by its manufacturing process.
5. 5. Engineers and scientists at PLC performed research into whether another kind of post-consumer plastic not currently used in its plastics extrusion process could be used.
6. 6. Throughout the year, PLC participated in several trade shows that featured green products for use by parks and recreation facilities. For each trade show. PLC incurred cash expenses for transportation, registration, meals and lodging, and booth setup.
7. 7. Solar panels were installed on PLC’s administrative offices to supply part of the electricity needed for its operations. PLC paid cash.
8. 8. Six Toyota Prius Hybrid automobiles were purchased for the use of the sales staff. PLC paid cash.
9. 9. PLC issued common stock during the year to help finance growth.
10. 10. New production equipment that is 75% more energy efficient than the old equipment was purchased for cash.