C is corrent. Per ASC Topic 230, cash inflows and outflows from trading securities may be included in either operating or investing activities, based on the nature and purpose of the securities. Unrealized gains and losses on trading securities should be included in current income. Therefore, trading securities are carried at fair value and the amount of realized gain on the sale is the difference between the securities’ fair value at the beginning of the period and the amount of appreciation to the date of sale. Net income is the starting point when preparing the operating activities section of a statement of cash flows using the indirect method. Since the realized gain on sale is already included as a component of net income, only the fair value (carrying amount) of the securities at the beginning of the period must be added to net income. The total cash inflow from the sale (carrying amount plus realized gain) will then be included in operating activities.
A is incorrect. Per ASC Topic 230, cash inflows and outflows from trading securities may be included in either operating or investing activities, based on the nature and purpose of the securities. Unrealized gains and losses on trading securities should be included in current income. Therefore, trading securities are carried at fair value and the amount of realized gain on the sale is the difference between the securities’ fair value at the beginning of the period and the amount of appreciation to the date of sale. Net income is the starting point when preparing the operating activities section of a statement of cash flows using the indirect method. Since the realized gain on sale is already included as a component of net income, only the fair value (carrying amount) of the securities at the beginning of the period must be added to net income. The total cash inflow from the sale (carrying amount plus realized gain) will then be included in operating activities.
A is incorrect. Per ASC Topic 230, cash inflows and outflows from trading securities may be included in either operating or investing activities, based on the nature and purpose of the securities. Unrealized gains and losses on trading securities should be included in current income. Therefore, trading securities are carried at fair value and the amount of realized gain on the sale is the difference between the securities’ fair value at the beginning of the period and the amount of appreciation to the date of sale. Net income is the starting point when preparing the operating activities section of a statement of cash flows using the indirect method. Since the realized gain on sale is already included as a component of net income, only the fair value (carrying amount) of the securities at the beginning of the period must be added to net income. The total cash inflow from the sale (carrying amount plus realized gain) will then be included in operating activities.
D is incorrect. Per ASC Topic 230, cash inflows and outflows from trading securities may be included in either operating or investing activities, based on the nature and purpose of the securities. Unrealized gains and losses on trading securities should be included in current income. Therefore, trading securities are carried at fair value and the amount of realized gain on the sale is the difference between the securities’ fair value at the beginning of the period and the amount of appreciation to the date of sale. Net income is the starting point when preparing the operating activities section of a statement of cash flows using the indirect method. Since the realized gain on sale is already included as a component of net income, only the fair value (carrying amount) of the securities at the beginning of the period must be added to net income. The total cash inflow from the sale (carrying amount plus realized gain) will then be included in operating activities.
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