On January 1, 2014, Castlewood Company purchased machinery for its production line for $104,000. Using an estimated useful life of eight years and a residual value of $8,000, the annual straight-line depreciation of the machinery was calculated to be $12,000. Castlewood used the machinery during 2014 and 2015, but then decided to automate its production process. On December 31, 2015, Castlewood sold the machinery at a loss of $5,000 and purchased new, fully automated machinery for $205,000.

1. How would the previous transactions be presented on Castlewood's statements of cash flows for the years ended December 31, 2014 and 2015? Use the minus sign to indicate cash outflows.

Castlewood Company

Statements of Cash Flows

For the Years Ended December 31, 2014 and 2015

Partial statement of cash flows for 2014:

Cash flows from operating activities:

Net income

$ XX,XXX

Cash flows from investing activities:

Partial statement of cash flows for 2015:

Cash flows from operating activities:

Net income

$ XX,XXX

Cash flows from investing activities: