Braden and Sons, Inc., paid cash to purchase equipment costing $342,000 this year. Also this year, the company sold for $70,000 cash equipment that originally cost $230,000 5 years ago. How should these transactions be listed in the statement of cash flows

The purchases and the sales of equipment must be shown separately as a decrease to cash for $342,000 (purchase) and an increase of $70,000 (sale).

Explanation:

Since the cash is paid for purchased an equipment so the same should be shown in the investing activities as the cash outflow and the company sold $70,000 cash equipment so this also to be shown as the investing activities as the cash inflow

Therefore the last option is correct

Parrain Parrain · Answer 2 · 2021-12-02T15:00:41+01:00

In listing these transactions in the Statement of Cash Flows, the proper thing to do is: The purchases and the sales of equipment must be shown separately as a decrease to cash for $342,000 (purchase) and an increase of $70,000 (sale).

The Statement of Cashflows:

Shows the cash transactions of a company
Can only show transactions involving actual cash

The amount that was used to purchase equipment was in cash so this will reduce the amount of cash that the company has.

The cash received from the sale of the equipment will be an increase in the company's cash. The previous price of the equipment is irrelevant because it does not involve cash.

In conclusion, the cash made should be added and the cash spent should be deducted.

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