The following information was extracted from the records of Ustinof Limited
-Opening balance of Equipment,$360 000
-Closing balance of Equipment,$400 000
-Cost of new Equipment,$80 000
-Proceeds from sale of Equipment,$6000 (Cost $40 000; Carrying amount $10 000)
The total cash flows from investing activities is determined as
A)$40 000 cash outflow
B)$74 000 cash outflow
C)$76 000 cash outflow
D)$80 000 cash outflow.

Question

Quizplus · Accepted Answer

The cash outflow for purchasing new equipment is $80,000 (given in the information). 
The cash inflow from selling equipment is $6,000 (given in the information).
The net increase in the value of equipment is $40,000 (given in the information).
Therefore, the total cash outflow for investing activities is ($80,000 + $6,000 - $40,000) = $46,000.
However, this only answers the net change in equipment, not the total cash flow from investing activities. 
To determine the total cash flow from investing activities, we need to add the proceeds from the sale of equipment to the cash outflow for purchasing new equipment, and then subtract the net increase in the value of equipment. 
Therefore, the total cash outflow from investing activities is ($80,000 - $6,000 - $40,000 + $40,000) = $74,000.

The Following Information Was Extracted from the Records of Ustinof