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NEW QUESTION: 1
Agency Rent-A-Car reports cash flows from acquisitions and sales of Rental Automobiles (RA) as investing activities. It provides an unclassified balance sheet, with RA reported under Property and
Equipment and amounting to at least 49% of total assets in 2010; car rentals are 77% of total revenue.
Net cash received on RA transactions of $5.751 million ($68.96 million realized on sales less $63.21 million spent on purchases) is highly material to Agency's net $9.06 million investing cash outflow, less so to the $83.15 million reported operating cash flow. Agency's rental fleet turns over about every other year.
The predominance of rental revenues and low RA turnover supports investing activity classification. The classification has a material effect on reported operating cash flow and investing cash flow. Reclassifying
Agency's $5.75 million RA net cash inflow from investing to operating will ______ its net investing cash flow by 63% percent while ______ operating cash flow by 7%.
A. decrease, increasing.
B. increase, increasing.
C. decrease, decreasing.
Answer: A
Explanation:
Note the RA net cash flow is positive.
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