A company sold an investment in trading securities originally costing $30,000, f

Question

A company sold an investment in trading securities originally costing $30,000, for $28,000. At the beginning of the year, the investment had a valuation allowance of $3,000, debit. What is the correct disclosure for these events on the statement of cash flows prepared under the direct method, assuming that this is the only investment in trading securities?
a. $28,000 operating cash inflow; add $33,000 in the reconciliation of earnings and net operating cash flow
b. $28,000 operating cash inflow
c. $28,000 operating cash inflow; add $5,000 in the reconciliation of earnings and net operating cash flow
d. Add $5,000 in the reconciliation of earnings and net operating cash flow.

Explanation / Answer

a. $28,000 operating cash inflow; add $33,000 in the reconciliation of earnings and net operating cash flow

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