When using the indirect method to determine cash flows from operating activities, an increase in held-to-maturity securities that does not arise from the interest component of the debt should be reported as:
A) A deduction from net income in determining cash flows from operating activities.
B) An addition to net income in determining cash flows from operating activities.
C) An investing activity.
D) A financing activity.

Question

Quizplus · Accepted Answer

Purchasing investment securities is reported as an investing activity in the statement of cash flows.The interest adjustment which reduces a discount and increases the amortized cost basis of the securities would be reflected in the operating activities section. The other increase in the account would be from investing in additional securities.

When Using the Indirect Method to Determine Cash Flows from Operating