Loading acctg211..

Cash Flows From Investing Activities: Quick Explanation

The Cash Flows From Investing portion of the statement of cash flows shows you details on the cash inflows and outflows from the purchase and sale of long-term assets and from the making and collecting of long-term loans. This page will briefly show you the Cash Flows From Investing section of the statement of cash flows for Lucky 7, Inc. Later, this lesson will provide a detailed explanation of this section of the statement of cash flows for Lucky 7, Inc.

You will focus on the cash inflows and outflows related to long-term assets and the making and collecting of long-term loans; Lucky 7 had the following transactions:

1. The company purchased long-term investments in the amount of $100,000.
   • In this transaction, the company paid $100,000 (cash outflow) for long-term investments.
2. The company sold, for $90,000, long-term investments that cost $83,000.
   • In this transaction, the company received $90,000 in cash (cash inflow) from the sale of long-term investments.
3. The company purchased plant assets in the amount of $200,000.
   • In this transaction, the company paid $200,000 (cash outflow) for plant assets.
4. The company sold, for $40,000 cash, plant assets that had a cost of $50,000 and a balance in accumulated depreciation of $5,000.
   • In this transaction, the company received $40,000 in cash (cash inflow) from the sale of a plant asset.
5. The company purchased $50,000 of plant assets in exchange for notes payable. This is a non-cash transaction.
   • In this transaction, no cash exchanged hands. This transaction does not belong in the Cash Flows From Investing Activities section of the statement of cash flows. This transaction will be shown separately in the statement of cash flows (in the schedule of non-cash investing and financing transactions).

Assuming that these were the only transactions that affected long-term assets, you would prepare the Cash Flows From Investing Activities section of the statement of cash flows as follows:

Note that cash inflows are shown as positive numbers, and cash outflows are shown as negative numbers.

A full explanation for the Cash Flows From Investing Activities section is shown later in the lesson.