Varsity Corporation sold available-for-sale securities costing $800,000 for $860,000 cash. This transaction is reported in Varsity's income statement and statement of cash flows, respectively, as:

Question

Quizplus · Accepted Answer

When available-for-sale securities are sold, any difference between the sale price and the original cost is recognized as a gain or loss in the income statement. In this case, since the securities were sold for $860,000, which is $60,000 more than the original cost of $800,000, there is a $60,000 gain that should be reported in the income statement. The cash received from the sale is reported in the statement of cash flows, and since the sale was for cash, the amount reported should also be $860,000. Therefore, the correct answer is choice C.

Varsity Corporation Sold Available-For-Sale Securities Costing $800,000 for $860,000 Cash