Avatar Company Uses the Indirect Method to Prepare Its Statement

question 61

Multiple Choice

Avatar Company uses the indirect method to prepare its statement of cash flows and provides following information about transactions for the year:
• Plant assets, net-beginning balance: $90,000
• Plant assets, net-ending balance: $120,000
• Equipment costing $52,000 was purchased for cash
• Equipment with a net asset value of $10,000 was sold for $14,000
• Depreciation expense of $12,000 was recorded during the year
What was the net amount of Cash from investing activities?

• A) $38,000 negative
• B) $60,000 positive
• C) $52,000 negative
• D) $30,000 negative

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Definitions:

Fixed Rate Bond

A bond that pays a predetermined interest rate to investors for the entire term of the bond.

Fallen Angel

Originally investment-grade bonds that have been downgraded to junk bond status due to the issuer's weakened financial condition.

Investment-Grade Bond

A bond with a high credit rating, indicating lower risk of default, making it an attractive investment option for conservative investors.

Junk Bond

A high-yield bond with a lower credit rating than investment-grade bonds, reflecting higher risk.