During the fiscal year that just ended, Okada Corporation had an unrealized holding gain or $125,000 on one of its debt investments. If Okada classified this investment as a trading investment, then it should A : add the amount of the gain to its net income when computing its net cash flow from investing activities. B : add the amount of the gain to its net income when computing its net cash flow from operating activities. C : deduct the amount of the gain from its net income when computing its net cash flow from operating activities. D : deduct the amount of the gain from its net income when computing its net cash flow from investing activities.

Question

Business

Arnav Sweeney

2 February, 12:00

During the fiscal year that just ended, Okada Corporation had an unrealized holding gain or $125,000 on one of its debt investments. If Okada classified this investment as a trading investment, then it should A : add the amount of the gain to its net income when computing its net cash flow from investing activities. B : add the amount of the gain to its net income when computing its net cash flow from operating activities. C : deduct the amount of the gain from its net income when computing its net cash flow from operating activities. D : deduct the amount of the gain from its net income when computing its net cash flow from investing activities.

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Answers (1)

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Alvin · Answer 1

C) deduct the amount of the gain from its net income when computing its net cash flow from operating activities.

Explanation:

Since Okada corporation decided to classify this investment as a trading investment, any gains or losses will be included in the cash flow of operating activities and not in the cash flow of investment activities. When a company acquires ans sells securities for the purpose of generating profit, those activities are classified as operating activities.