CFA Practice Question

CFA Practice Question

The following financial data on CashCow, Inc. have been taken from its financial statements for 2015:

a. Dividends paid: $25,000
b. Sale of land: $64,000
c. Inventory purchases: $29,000
d. Purchase of a warehouse: $208,000
e. Bonds issued: $90,000
f. Dividends received from investments: $17,000
g. Interest paid on bonds: $2,400
h. Salaries paid: $107,400
i. Cash collection from customers: $28,400
j. Loss on land sale: $18,000
k. Beginning cash balance: $312,000

Using the above data, the investing cash flow is ______.
A. -$162,000
B. -$126,000
C. -$144,000
Explanation: Items b and d are the investing cash flows. Note that item j is a non-cash event.

User Contributed Comments 14

User Comment
shasha j goes to P&L to get net income.
shasha Is the $64,000 for land sale the book value or market value? seems you took it as market value, 'coz you didn't consider the $18,000 lost on land sale.
chenyx Loss on land sale os non-cash event.
danlan j is a non-cash event
Birdy101 what would happen if the sale of land resulted in a gain?
wineo either gain or loss goes into the P&L statement and then adjusted inversely in CFO to avoid double accounting as the total transaction amount is reflected in CFI.
takor thanks, wineo.
dlukas Though $127,000 isn't one of the choices, under IFRS dividend income can be booked as either CFO or CFI, and the question doesn't specify GAAP vs IFRS...
mindi j is an operating expense while b is investing
Merke dlukas is right, they don't specify whether it's US GAAP or IFRS. In this case we need to assume it as US GAAP by default as I assumed the Sale of Land as Book Value item.
trugunna What about dividends received?
Lambo83 Analyst Notes is based in the US and I have been finding that many questions are from the perspective of US GAAP, if it hasn't been explicitly stated it is US GAAP or IFRS. Which is annoying because I believe in the actual exam if the question neithers states US GAAP or IFRS the candidate should answer based on IFRS as default. Rant over
sloriot Why don't they specify whether we should use GAAP or IFRS? what should I assume? Dividend received can be investing under IFRS
ashish100 You guys sound like noobs.

I've seen it so many times. If it doesn't state IFRS or US GAAP, always assume US GAAP.

Coz 'Merica!
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