How Should the Transactions Involving Marketable Securities Be Classified in Kenny's

question 3

Multiple Choice

How should the transactions involving marketable securities be classified in Kenny's statement of cash flows for 2010?

• A) The purchase of marketable securities, sales of marketable securities, and receipt of dividends are all classified as investing activities.
• B) The purchase and the sale of marketable securities are classified as investing activities; the receipt of dividends is classified as an operating activity.
• C) The purchase of marketable securities is classified as an investing activity; the sale of marketable securities is classified as a financing activity; the receipt of dividends is classified as an operating activity.
• D) The purchase and the sale of marketable securities are classified as investing activities; the receipt of dividends is classified as a financing activity.

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Definitions:

First Bank

Historically, refers to the initial bank established in a region or country, or the earliest phase of banking service provision.

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money, either on demand or at a specified future date.

Maturity Date

The specified date on which the principal amount of a financial instrument, such as a bond, loan or fixed deposit, is due to be repaid.

Negotiability

The quality of being transferable by endorsement or delivery so as to enable the holder to pass title to a third party.