The activities for the year ended December 31,2018 included the following: • Sold a held-for-trading investment for $10,000.The book value was $15,000.
• Sold an available-for-sale investment for $10,000.The book value was $5,000.
How much would be presented as cash flow from operating activities?
A)Proceeds from disposal in the amount of 10,000.
B)Proceeds from disposal in the amount of 20,000.
C)Loss on sale in the amount 5,000.
D)Loss of 5,000 + Gain of 5,000.

Question

Quizplus · Accepted Answer

The cash flow from operating activities would include the net effect of the loss and gain from the sale of investments. The loss from the held-for-trading investment is $5,000 ($15,000 book value - $10,000 sale price), and the gain from the sale of the available-for-sale investment is $5,000 ($10,000 sale price - $5,000 book value). The net effect is a loss of $5,000 plus a gain of $5,000, which cancels each other out, resulting in no impact on cash flow from operating activities. However, the actual cash inflow from these transactions would be reported under cash flows from investing activities, not operating activities. The correct answer choice reflects the calculation of the loss and gain, not their classification in the cash flow statement.

The Activities for the Year Ended December 31,2018 Included the Following