Diaz Company Had the Following Comparative Balance Sheet Information at the End

question 78

Essay

Diaz Company had the following comparative balance sheet information at the end of Year 2 and Year 1:
$\begin{array}{c}\text {Diaz Company}\\\text { Comparative Balance Sheets}\\\begin{array}{lll}\\\text {Cash}\\\text {Accounts receivable}\\\text {Inventory}\\\text {Prepaid insurance}\\\text {Property, plant and equipment}\\\text {Accumulated depreciation}\\\text {Total}\\\text {Accounts payable}\\\text {Bonds payable}\\\text {Common stock}\\\text {Retained earnings}\\\text {Total}\end{array}\begin{array}{cc} \text { Year } 2 & \text { Year } 1 \\ \$ 30,000& \$ 28,000 \\ 48,000 & 50,000 \\ 158,000 & 156,000\\ 10,000& 8,000 \\ 70,000 & 60,000 \\ (14,000) & (10,000) \\\$ 302,000 & \$ 292,000 \\\$ 14,000 & \$ 18,000 \\ 90,000 & 120,000 \\140,000 & 120,000 \\58,000 & 34,000 \\\$302,000 &\$292,000 \\\end{array}\end{array}$
Diaz reported net income for Year 2 of $40,000.No property,plant,and equipment were disposed of during the year.Diaz uses the indirect method to prepare the statement of cash flows.
Calculate Diaz's cash flow from investing activities for Year 2.

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Definitions:

FIFO Method

An inventory valuation method that assumes that the first items placed in inventory are the first sold, standing for First-In, First-Out.

Equivalent Units

A concept in cost accounting used to convert partially completed goods into an equivalent number of fully completed units for inventory valuation.

Direct Materials

The raw materials used in the manufacturing process that are directly incorporated into the finished product.

Units Started and Completed

The quantity of product units that undergo the entire manufacturing process, from start to finish, within a given period.