Hi !

Can someone explain how they arrived at the Purchase of equipment (190,000) for the cash flow statement? I have no idea at all where they came up with that figure. :confused:

Attached is the question and the solution.



Thank you so much in advance!

The info you need's found in the Balance Sheet. First look at the change in the Prop, Plant, Equip amount, from 2004 to 2005. Next, look at the data you're given in Note 2.

And think of this: If I said that yesterday morning I started the day with $100 of assets, and that during the day I sold off $30 of those assets, but that I ended the day with $120 of assets... how much must I have purchased during the day?

Think it through... you'll get it.

You might try making a t account and see if that helps. Put in your beginning balance, and then account for the information they came straight out and gave you. (In the additional data.)

Then you have missing information to get from there to the ending balance given. You need to find that missing number.

You also have to make an assumption, which I kind of don't like. They should have given some type of information so that you don't have to assume anything.