Company ABC. shows on its statement of financial position its investments accounted for as FV-OCI investments....

Company ABC. 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 $90,000 and at its year end of May 31, 2019, the balance was $100,000. Novak’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 $10,000. There were no sales of FV-OCI investments during the year, only purchases.

Determine the necessary caption and amount that should appear on Novak’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.

Expert Solution

As there are no sales of any investments categorized as fair value through OCI and the total value of the investments account for as FV-OCI on the balance sheet as on May31, 2019 has increased from the beginning of the year and still there is a loss recorded on the investment in the OCI, that means an asset was bought that was categorized as FV-OCI which made a loss.

The investment in the current year = ending investment account value - beginning investment account value+ total loss recorded in OCI

= 10000 + 10000

= $20,000

There will be cash outflow recorded of $20000 as investements bought under the cash flow from investing activity.

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ekkarill92 answered 2 years ago

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