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on september 1, year 2, canary co. sold used equipment for a cash amount equaling its carrying amount for both book and tax purposes. on september 15, year 2, canary replaced the equipment by paying cash and signing a note payable for new equipment. the cash paid for the new equipment exceeded the cash received for the old equipment. how should these equipment transactions be reported in canary's year 2 statement of cash flows?

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khuranashilpa76

The equipment transactions are reported in canary's year 2 statement of cash flows by option d. Cash inflow is equal to the cash received and cash outflow is equal to the cash paid.

Cash paid to purchase equipment appears as cash outflows and cash paid in sales of equipment appears as cash inflows. Both cash inflows and cash outflows are reported separately in the Investing Cash Flows section.

  • Cash paid exceeds cash received, but both cash inflows and cash outflows are reported separately rather than as net cash outflows. So variant a is wrong.
  • There are no cash outflows from the issuance of promissory notes. So option b is also wrong.
  • There are no cash outflows from the issuance of promissory notes. So option c is wrong.

Disclaimer:- your question is incomplete, please see below for the complete question.

a. Cash outflow equal to the cash paid less the cash received.

b. Cash outflow equal to the cash paid and note payable less the cash received.

c. Cash inflow equal to the cash received and a cash outflow equal to the cash paid and note payable.

d. Cash inflow equal to the cash received and a cash outflow equal to the cash paid.

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