A Company Completed the Following Transactions Involving Investments During 2014

question 137

Multiple Choice

A company completed the following transactions involving investments during 2014. $\begin{array}{ll}\text { Purchased money market funds for } &\$ 50,000 \\\text { Sold available-for-sale securities (cost \$ 60,000 ) for } &\$ 70,000 \\\text { Purchased trading securities for } &\$ 55,000\end{array}$ The company 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:

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