A company's 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.
Using the indirect method,how much would be presented as cash flow from operating activities?

Question

Quizplus · Accepted Answer

The question asks for the cash flow from operating activities, so we need to adjust the gain/loss on sale of investments to arrive at the cash flow from operating activities. 
- For the held-for-trading investment, there is no adjustment needed as it was held for trading and the gain/loss on sale is already included in operating activities, so we add the $10,000 proceeds to the cash flow from operating activities.
- For the available-for-sale investment, we need to adjust for the gain/loss on sale. The gain/loss on sale is the difference between the proceeds and the book value, which is $10,000 - $5,000 = $5,000. However, this adjustment is a non-operating item, so we subtract it from the cash flow from operating activities. 
Therefore, the total adjustment to cash flow from operating activities is $10,000 - $5,000 = $5,000, giving us the final answer of D.

A Company's Activities for the Year Ended December 31,2018 Included