Early in 2014, Larsen Corporation purchased equity securities at a cost of $90,000. In September, dividends of $6,600 were received; Larsen sold the securities in December at a gain of $5,600. How would these transactions be reported on Larsen's statement of cash flows for 2014?

Question

Quizplus · Accepted Answer

The purchase of equity securities for $90,000 is a cash outflow from investing activities, which would be reported as such on the statement of cash flows. The receipt of dividends of $6,600 is a cash inflow from operating activities, and would be reported as such. The sale of the securities for a gain of $5,600 is a cash inflow from investing activities, which would also be reported as such on the statement of cash flows. Therefore, the net cash from investing activities would be $5,600, and the dividends received would be included in the cash from operating activities section.

Early in 2014, Larsen Corporation Purchased Equity Securities at a Cost