A Company Sold an Investment in Trading Securities Originally Costing

question 3

Multiple Choice

A company sold an investment in trading securities originally costing $30,000,for $28,000.At the beginning of the year,the investment had a valuation allowance of $3,000,debit.What is the correct disclosure for these events on the statement of cash flows prepared under the direct method,assuming that this is the only investment in trading securities?

• A) $28,000 operating cash inflow;add $5,000 in the reconciliation of earnings and net operating cash flow
• B) $28,000 operating cash inflow
• C) $28,000 operating cash inflow;add $33,000 in the reconciliation of earnings and net operating cash flow
• D) Add $5,000 in the reconciliation of earnings and net operating cash flow.

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Definitions:

Optimal Choices

Optimal choices refer to decision-making that maximizes utility or benefit within given constraints, finding the best possible outcome from a set of alternatives.

Scarcity

The basic economic issue arises from the reality of endless human desires facing the constraint of finite resources.

Normative

Pertaining to or expressing judgments based on values, standards, or ideals, often concerning what is right or wrong, or what ought to be.

Positive

Refers to statements or assertions that are objective and based on factual evidence, often used in the context of affirming information in sciences and economics.