Company P
Company P Completed the Following Transactions Involving Investments

question 193

Multiple Choice

Company P
Company P completed the following transactions involving investments during Year 2:
$\begin{array}{llr} \text {Purchased money market funds for } &\$50,000\\ \text {Sold available-for-sale securities (cost \( \$ 60,000 \) ) for } &\$70,000\\ \text { Purchased trading securities for } &\$55,000\end{array}$

-Refer to the Company P figure.Company P uses the indirect method to prepare the operating activities section of the statement of cash flows.The following statements describe how the company reported the cash flow effects of the above transactions.Which of the following has been reported incorrectly?

• A) Payments of $50,000 for money market funds were reported as a cash outflow in the investing activities section.
• B) Proceeds of $70,000 were reported as a cash inflow in the investing activities section.
• C) Payments of $55,000 for trading securities were reported as a cash outflow in the operating activities section.
• D) A gain of $10,000 on the sale of available-for-sale securities was deducted from net income in the operating activities section.

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Definitions:

Covariance

A measure that indicates the degree to which two variables change together, showing if increases in one variable tend to be associated with increases or decreases in the other.

Marginal Probability

The probability of an event occurring, taken in isolation, without consideration of any other related events.

Car Sales

The number of automobiles sold within a specific period, an indicator of the automotive industry's health and consumer demand.

Conditional Probabilities

The probability of an event occurring given that another event has already occurred, reflecting how the likelihood of the event is affected by the knowledge of another outcome.