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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Dunn Company recognized a $5,000 unrealized holding gain on investment in Starbucks’s long-term bonds during 2019. The company classified its investment as an available-for-sale security. How would this information be reported on a statement of cash flows prepared using the indirect method?

To determine

Explain recording of unrealized gain on investment as available for sale of security in cash flow statement under indirect method.

Explanation

Statement of cash flows: Cash flow statement reports all the cash transactions which are responsible for inflow and outflow of cash. The results of these transactions are reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities.

Indirect method: Under indirect method, net income is reported first, and then non-cash expenses, losses from fixed assets, and changes in opening balances and ending balances of current assets are adjusted to reconcile the net income balance.

Available for sale securities: Available for sale securities are debt securities the company intends to hold for an indefinite period...

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