Is the following TRUE or FALSE? If any of the problem is FALSE, explain why. 1.

Question

Is the following TRUE or FALSE? If any of the problem is FALSE, explain why.

1. Purchases and sales of securities are always reported as financing activities in a statement of cash flows. TRUE or FALSE

2. Unrealized gains and losses are never included in other comprehensive income for securities that are classified as available for sale. TRUE or FALSE

3. If an investment is accounted for under the equity method, the investor increases investment income and the investment account for amortization of goodwill acquired in the investment. TRUE or FALSE

Explanation / Answer

1. True.Purchases and Sales of securities are always reported as financing activities in a statement of cash flows. As through issue of Bonds, debentures,stock etc ,the company finances money for expansion of its business.

2. False. Unrealized gains and losses are included in other comprehensive income for securities that are classified as available for sale.

3. True. If an investment is accounted for under the equity method, the investor increases investment income and the investment account for amortization of goodwill acquired in the investment.

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