Miss Maggie Company entered into the following transactions during the year:
Miss Maggie had no investment securities at the beginning of the year. The cost of the trading securities sold was $300; the cost of the available-for-sale securities sold was $150 . The fair value of the remaining securities on December 31 was as follows: trading securities, $310.available-for-sale securities, $460. The net income for the year was $1,000. Assume that net income does not include any noncash items except for those related to investment securities. In all cases, assume that trading securities were acquired for operating purposes.
1)cash flow from operating activities and
2)cash flow from investing activities.
It would be great if you could show your steps so I can fully understand it. Thank you!
Homework Answers
1. Cash Flow from Operating Activities:
Net income from Trading Securities
Sale of trading Securities - $220
Cost of trading Securities sold - $300
Net Income/(Loss) - ($80)
Therefore, Cash Flow from Operating Activities is ($80) i.e., there is cash oulflow in operating activities $80
2. Cash Flow from Investing Activities:
Purchase of available for sale securities - ($900)
Sale of available for sale securities - $470
Net Cash ouflow - $430
Therefore, cash flow from investing activities is ($430) or cash ouflow from investing activities is $430
(Fair value changes don't have any effect in cash. Therfore, fair values are not considered)
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