Question

Each of the following would be reported under operating activities except Select one: a. cash payments for interest expense. b. cash receipts from sales of goods. c. cash receipts of dividends. d. cash receipts from sales of investments. e. cash receipts from interest on loans.

Answer 1

Answer:

cash receipts from sales of investments.

Explanation:

Operating activities are defined as activities that creates revenue and expenses in a business, and so are used to determine if a business is making a profit or loss. It includes activities directly related to providing goods and services to the consumer.

Cash reciepts form sale of investment such as stocks and bonds is classified as an investing activity. It is a positive investing activity because it involves inflow of cash.

This is not classified as an operating activity.

Answer 2

Answer:

d. cash receipts from sales of investments.

Explanation:

The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.

The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.  

The sale of assets, purchase/sale of investments are examples of investing activities while the issuance of stocks, debt principal deduction (loan settlement), issuance of debt securities etc are examples of financing activities.

As such, option d. cash receipts from sales of investments is an investing activity.