A Company's Activities for the Year Ended December 31, 2021

question 44

Multiple Choice

A company's activities for the year ended December 31, 2021 included the following: • Sold an investment at FVPL for $10,000. The investment was held for trading purposes. The book value was $15,000.
• Sold an Investment at FVOCI for $10,000. The original cost was $5,000.
Using the indirect method, how much would be presented as cash flow from operating activities?

• A)Proceeds from disposal in the amount of 10,000.
• B)Proceeds from disposal in the amount of 20,000.
• C)Loss on sale in the amount 5,000.
• D)Adjustment of $5,000 on loss on sale of the investment at FVPL, an adjustment of $(5,000)on the recycled gain on sale on the investment at FVOCI, and +$10,000 inflow from the sales proceeds of the investment at FVPL.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs (both fixed and variable) in the cost of a product.

Operating Income

Earnings from a company's core business operations, excluding expenses and revenues from investments and other non-operational activities.

Variable Costing

An accounting method that only allocates variable production costs to products, excluding fixed costs.

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a product.