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Let's use this problem to talk about the purchasing of plant assets. Plant assets are gonna fall under your investment section of your statement of cash flows, but you can't always just look at the difference in the accounts and figure out how much you purchased. Let's take a look. So we'll call it PP&E. In Year 1, you had 242,500, and at the end of Year 1 you had 270,000. You may be tempted to look at this and say, "Well, it's just the difference between the two." That may be right sometimes, but you need to be very careful because it may not be right other times.
'Cause you see here, new plant assets were purchased for cash, great, but this, old plant assets, were sold. So there's some entry over here, and there's some entry over here. So we have to figure out what those entries are.
It's actually not terribly complicated. They tell us 57,500 was how much they originally cost. If you'll remember, for plant, property, and equipment, on the balance sheet you see plant, property, and equipment, and then you see less accumulated depreciation for some amount. This PP&E account always holds the original or historical cost, and any depreciation goes in this accumulated depreciation account. So when they tell you the original cost was 57,500, well, then you can go ahead and take out the 57,500, and that leaves you with 85,000 on the other side. And this is what you were looking for. This is your cash. This is your cash paid for purchases of plant, property, and equipment.
They tell you in the problem that it was cash, so keep an eye out for that. It could say cash, 50/50 cash/stock. So if it said 50/50 cash/stock, you would need to do 85,000 divided by 2 equals the cash. But since they tell you it was paid for using cash, all you need to do is find out how much did I buy? And you can't find that out without knowing, is there anything that goes on the sell side? Did we sell any assets during the year? And we did. We have the original cost given to us. And if we didn't have the original cost given to us, you would have to calculate that too.
So that makes this problem pretty easy. But if we didn't have the original cost given to us, you would have to figure that out, 'cause remember, these always go in and they come out at original or historical cost.