Answer: A) The net outflow amounts to $2,000.
Explanation:
Investing Activities noted in the cash flow statement pertain to transactions related to capital expenditures for the company such as buying or selling Fixed Assets like Property, Land, or Equipment.
Cashflow from investments also includes dealings with other companies' stocks or bonds.
It's important to note that transactions are documented in the Investing Cashflow segment only when there is an immediate CASH exchange.
In Flow Company’s records for the year, the transactions qualifying as Investing Activities are:
Cash spent on equipment purchases is $27,000
Cash received from selling land with a $32,000 book value is $25,000
The acquisition of land in exchange for Preferred Stock does not qualify here as there was no immediate cash exchange.
Thus, the net cash flow from Investing is
= -27,000 (outflow) + 25,000 (inflow from land sale)
= -$2,000
This indicates a net cash outflow of -$2,000 so Option A holds true.
