Question

When using the indirect method, how is the receipt of cash from the sale of long-term investments treated on the statement of cash flows?

a.
As an operating activity

b.
As an investing activity

c.
As a financing activity

d.
As a noncash investing or financing activity

Answer 1

The receipt of cash from the sale of long-term investments is treated as an investing activity on the statement of cash flows.

Step-by-step explanation:

When using the indirect method, the receipt of cash from the sale of long-term investments is treated as an investing activity on the statement of cash flows.

This is because the sale of long-term investments is considered as a transaction related to the company's investment activities, rather than its core operating activities. The cash received from the sale is classified under the investing section of the statement of cash flows, along with other cash flows related to the acquisition or disposal of long-term assets.

Therefore, option b. As an investing activity, is the correct answer.