CFA Practice Question
The following financial data on CashCow, Inc. have been taken from its financial statements for 2015:
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
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! |