Moon Company owns 56 million shares of stock of Center Company classified as available for sale. During 2009, the fair value of those shares increased by $34 million. What effect did this increase have on Moon's 2009 statement of cash flows?
A)Cash from operating activities increased.
B)Cash from investing activities increased.
C)Cash from financing activities increased.
D)No effect.The unrealized gain is not a cash flow.

Question

Quizplus · Accepted Answer

Unrealized gains or losses, which are changes in the fair value of available-for-sale securities, are reported in the statement of comprehensive income, but they do not affect cash flows. Therefore, there will be no effect on Moon's statement of cash flows.

Moon Company Owns 56 Million Shares of Stock of Center