Dolan Company reports its income from investments under the equity method and recognized income of $25,000 from its investment i

Question

3 years ago

14

Dolan Company reports its income from investments under the equity method and recognized income of $25,000 from its investment i

n Moss Co. during the current year, even though no dividends were declared or paid by Moss during the year. On Dolan's statement of cash flows (indirect method), the $25,000 should:________. A) not be shown. B) be shown as cash inflow from investing activities. C) be shown as cash outflow from financing activities. D) be shown as a deduction from net income in the cash flows from operating activities section.

Business

1 answer:

koban [17] · Answer 1 · 2022-07-23T20:42:57+03:00

Answer:

The answer is B.

Explanation:

The correct option is B.

Dolan company has an investment in Moss which gave him an income(inflow) of $25,000. So on Dolan's statement of cash flow, this transaction will be under 'Cash flow from Investing Activities' and the line item will be:

Cash inflow from Investing Activities - $25,000.

It doesn't matter whether a cash flow is prepared in a direct or indirect manner for Investing Activities or Financing Activities, it only affect Operating Activities.