Answer:
net cash from investing activities = -$4,940
operating and financing activities are not affected.
Explanation:
the journal entries should be:
January 1, socks purchased
Dr Investment in Affiliate 5,000
<u>Cr Cash 5,000</u>
December 31, dividends received
<u>Dr Cash 60</u>
Cr Investment in Affiliate 60
December 31, Affiliate reports net income
Dr Investment in Affiliate 300
Cr Revenue from investing activities 300
Only the cash flow from investing activities will be affected by Parent's investing in Affiliate. Since the company uses the equity method, the operating and financing cash flows are not affected.
The cash flow from investing activities will:
- Decrease by $5,000 due to the purchase of stocks.
- Increase by $60 due to the dividends received.
- net cash from investing activities = -$4,940
