Geller Florist Inc. had the following transactions during 2015: Purchased a $200

Question

Geller Florist Inc. had the following transactions during 2015: Purchased a $200,000 warehouse with $50,000 cash and a $150,000 mortgage from a bank. Raised $100,000 from selling new shares of stock to investors. The cash was used to buy land to grow tulips. Sold an old building for $50,000 (and suffered a loss on sale of $5,000) and used the cash to buy a new truck. What is the net impact of these transactions on Geller's Cash from Investing Activities during 2015? $(150,000) $(145,000) $(300,000) $(50,000) $(295,000)

Explanation / Answer

Cash from Investing Activities during 2015 can be calculated as under :

Purchase of warehouse ($50,000)

Land to grow tulips ( $100,000)

Sale of Old Building $50,000

Purchase of New Truck ($50,000)

Hence, Net Impact is $(150,000)

Note : Cash from Investing Activities includes

i. Cash Payments to acquires fixed assets

ii. Cash received from disposal of fixed assets

iii. Cash received from disposal of Shares (other than those considered to be cash equivalents and those held for dealing or trading purpose).

Sale of new shares of stock to investors is assumed to be cash equivalents or those held for dealing or trading purpose. Hence, the same is to be reported as Financing Activity and not Investing Activity.

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.