The Investing section of the cash flow statement always gets the full amount of cash flow for a particular item. In this case, stock was sold for $150,000, so the entire amount goes in the Investing section.
Not enough information is provided to know if there's an impact to the Operating section. The gain/loss adjustment in the Operating section would occur in the year of the gain/loss, not the year of the sale. By way of example, however, if the gain in this question occurred in the same year as the sale, the Investing section would still show the full $150,000. The Operating section would show the $50,000 gain as an adjustment to net income (note - that this is not a cash flow number. It's merely an adjustment to net income to
arrive at a cash flow number for the Operating section).
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Michael Ramsey
Director/Manager
Omaha NE
United States
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Original Message:
Sent: 10-22-2020 09:35 AM
From: Panagiotis Papadopoulos
Subject: Cash Flow Statement - Gain on sale stocks
Three years ago, James Company purchased stock in Zebra Inc. at a cost of $100,000. This stock
was sold for $150,000 during the current fiscal year. The result of this transaction should be shown
in the Investing Activities Section of James' Statement of Cash Flows as
a. Zero.
b. $50,000.
c. $100,000.
d. $150,000.
Correct answer: d.
I would like to ask if someone know better this answer....when we have a gain from selling stocks isn't it similar to gain on sale of equipment.
Because when we have gain on sale of equipment, this gain should be in operating cash flow. So why is correct d and not c ?
(i thought 100000 in investing and 50000 in operating)....
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Panagiotis Papadopoulos
Controller
Greece
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