A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:
A. $50,000
B. $45,000
C. zero, this is an operating activity.
D. zero, this is a financing activity.|||I suppose the answer is A.
The depreciation is not included because it is non-cash. And since you're selling the machine for $50k, the amount reported in cash flow from investing is also $50k.
C and D are wrong because buying and selling machinery is an investment and has nothing to do with cash flow from operation or cash flow from financing. There is a big difference between buying a machine and using it for operation. Cash flow from operation relates only to the cash flows from the operation. Cash flow from financing involves cash flows from borrowing activities.
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