On January 1,2014,Bijou Company purchased investment securities costing $3,000 and classified them as available-for-sale.During 2014,Bijou Company sold a portion of these available-for-sale securities with a cost of $1,800 for $1,500.The market value of the remainder of these securities available-for-sale at December 31,2014,was $1,300.Bijou prepares its statement of cash flows using the indirect method. Which of the following represents the effect of these transactions on the statement of cash flows for Bijou Company for the year ending December 31,2014?
Operating Activities Investing Activities

Question

Quizplus · Accepted Answer

The sale of a portion of available-for-sale securities is classified as an investing activity. Therefore, there will be a decrease of $1,500 in cash flows from investing activities (selling price of $1,500 - cost of $1,800).

The market value of the remaining available-for-sale securities at December 31, 2014, is $1,300. This market value is not a cash flow but rather a valuing measure.

The change in the market value of available-for-sale securities during the year is not reflected in the statement of cash flows. Therefore, there is no effect on cash flows from investing activities due to the change in market value.

The effect of the available-for-sale investments on cash flows from operating activities is determined by changes in net income and adjustments related to noncash revenues and expenses. However, this information is not provided in the question.

On January 1,2014,Bijou Company Purchased Investment Securities Costing $3,000 and Classified