The Following Data for Larson Co

question 123

Multiple Choice

The following data for Larson Co. for the year ending December 31, Year 2, and the preceding year ended December 31, Year 1, are available:
In addition to the balance sheet data, assume that:
• Equipment costing $125,000 was purchased for cash.
• Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000.
• The stock was issued for cash.
• The only entries in the retained earnings account were net income of $51,000 and cash dividends declared of $13,000.

What are the net cash flows from operating, investing, and financing activities for Year 2?

• A) operating: $112,000; investing: $110,000; financing: $20,000
• B) operating: $112,000; investing: ($110,000); financing: $20,000
• C) operating: $61,000; investing: ($110,000); financing: $71,000
• D) operating: $144,000; investing: ($110,000); financing: ($12,000)

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Definitions:

Capital Investment

Funds invested in a business with the expectation of future returns, often in the form of physical assets or capital expenditures.

Recovery

The process of regaining possession or control of something stolen or lost, or the process of returning to a normal state of health, mind, or strength.

Average Rate

A value derived by dividing the sum of several rates by the number of rates, often used in financial calculations.

Capital Budgeting

The process of making investment decisions in long-term assets and projects.