Choice "D" is correct. Net cash from investing activities should include the cash received from the sale of the investment in Blue Co. offset by the cash paid to purchase the common stock from Brown Co.:
| |
|---|
| Cash proceeds from sale of Blue Co. | $ 75,000 |
| Cash paid to purchase Brown Co. common stock | (38,000) |
| Net cash received from investing activities | $ 37,000 |
Choice "c" is incorrect. The dividend received on the Grey Co. stock must be reported as an operating cash inflow, not as an investing cash inflow, under U.S. GAAP. IFRS is more flexible and allows the reporting of dividends received in investing activities or operating activities.
Choice "b" is incorrect. The cash paid to purchase the investment in the Brown Co. common stock must be reported in the investing section of the statement of cash flows, along with the cash proceeds from the sale of the Blue Co. stock.
Choice "a" is incorrect. The cash paid to purchase the investment in the Brown Co. common stock must be reported in the investing section of the statement of cash flows, along with the cash proceeds from the sale of the Blue Co. stock. Additionally, the dividend received on the Grey Co. stock must be reported as an operating cash inflow, not as an investing cash inflow, under U.S. GAAP.
