Question

In: Accounting

Pronghorn Inc. shows on its statement of financial position its investments accounted for as FV-OCI investments....

Pronghorn Inc. shows on its statement of financial position its investments accounted for as FV-OCI investments. At its year end of May 31, 2018, the balance in the FV-OCI Investments account was $93,500 and at its year end of May 31, 2019, the balance was $123,500. Pronghorn’s statement of comprehensive income for the year ended May 31, 2019, shows an unrealized loss from fair value adjustment on FV-OCI investments of $23,300. There were no sales of FV-OCI investments during the year, only purchases.

Determine the necessary caption and amount that should appear on Pronghorn’s statement of cash flows prepared using the indirect method and determine if the entry appear under the operating, investing, or financing section of the statement.

Solutions

Expert Solution

Unrealized loss from Fair value adjustment on FV- OCI Investment in a non - cash item which will reduce the value the value of Investment balance ,

therefore after adjustment

FO-OCI Investment balance= $ 93,500- $ 23,300

FO-OCI Investment balance = $ 70,200

The purchase of Investment in cash = Balance on May 31,2019 - FO-OCI Investment Balance after adjustment

                                                         = $ 123,500- 70,200= $ 53,300

Due to purchase Investment in cash ,cash will used( reduce) by purchase amount therefore

Statement of cash flow (partial)

Investing activities

$

Purchases of fair value through other comprehensive income Investment

- 53,300

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