In January 2013, Pennington Bancorp acquired $100,000 of marketable securities a

Question

In January 2013, Pennington Bancorp acquired $100,000 of marketable securities and classified them as Available for Sale. On March 31, 2013, Pennington prepared its 10-Q and marked the securities down to their market value of $85,000. On April 4, 2013, Pennington sold the securities for $93,000 cash. Which of the following items would be increased by the sale of the marketable securities? (check all that apply)
A - Cash from Investing Activities
b - Net Income
c - Cash from Financing Activities
d - Accumulated Other Comprehensive Income
e - Marketable Securities

Explanation / Answer

Only option (A) is correct.

Cash from investing activities will increase by $93,000 (sale value of AFS securities).

Net income will decrease (not increase) by $(93,000 - 85,000) = $8,000 (since there is a loss from sale).

Accommulated other comprehensive income & marketable securities will both fall (not increase).

This transaction doesn't fall under cash flow from financing.

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