The Following Transactions Occurred During the Year for XYZ Corporation

question 92

Essay

The following transactions occurred during the year for XYZ Corporation:
(a.) During the year, trading securities were purchased for $250,000.
(b.) During the year, securities available for sale were purchased for $80,000.
(c.) During the year, trading securities that are carried on the balance sheet at their fair value of $125,000 were sold for $125,000 cash.
(d.) At the end of the year, the trading securities portfolio has an aggregate fair value of $142,000 and an aggregate cost of $150,000.
(e.) At the end of the year the securities available for sale portfolio has an aggregate fair value of $95,000.
Required:
Indicate how each of these transactions would affect the statement of cash flows for a corporation. Assume the statement of cash flows is prepared using the indirect method. Each transaction is assumed to be independent of the other transactions.

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Definitions:

Large Lots

Refers to the practice of bulk buying or producing goods in significant quantities to achieve economies of scale.

Fixed Cost

Expenses that do not change with the level of goods or services produced over the short term.

Monthly Demand

The total amount of a product or service that consumers want to purchase over the course of a single month.

Holding Cost

The costs linked to holding inventory that hasn't been sold, such as storage fees, insurance costs, depreciation, and the loss of potential income.