Jim Sox Company owns debt securities classified as available for sale which were acquired in 2016 at face value of $17 million. During 2018, the fair value of those securities increased by $220,000. What effect did this increase have on Sox's 2018 statement of cash flows?
A) Cash flows from operating activities increased.
B) Cash flows from investing activities increased.
C) Cash flows from financing activities increased.
D) No effect.

Question

Quizplus · Accepted Answer

The adjustment to fair value each reporting period affects the investment and other comprehensive income, but not net income. Since there was no outflow of cash and no effect on net income, there is no adjustment for the cash flow statement.

Jim Sox Company Owns Debt Securities Classified as Available for Sale