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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.

Answer :

Parrain

Answer: Please refer to Explanation

Explanation:

The Indirect method of preparing the Cash Flow Statement is the more popular one and involves classifying each entry as either Operating, investing or Financing.

Operating Activities refer to the transactions related to the firm's core business.

Investing Activities relate to purchasing financial assets of other companies as well as fixed assets.

Financing Activities refer to how the company raises capital including with debt or equity.

a. This is an Operating Cash flow transaction during the year that REDUCES Cash Flow by $250,000 (Cash Outflow).

b. Cashflow for Investing Section. (Cash Outflow) reduces cash by $80,000.

c. Cash inflow from Operating Activities and is added to income. Cash balance increases by $125,000.

d. Unrealized loss of $8,000. It is a reduction in cash that reduces net income from Operating Activities.

e. Realized gain of $95,000 from Operating Activities. Cash inflow and is added to Net Income.

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