Multiple Choice
The purchase and sale of long-term assets and current investments are classified as which type of cash flow activity on the statement of cash flows?
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7. Receivables and Investments
Introduction to Investments in Securities
Multiple Choice
In the context of investments in securities, what is the consideration given by an investor when purchasing a security?
A
The market value of the security at year-end
B
The dividends received from the security
C
The purchase price paid for the security
D
The interest earned on the security
Verified step by step guidance1
Understand the concept of 'consideration given' in financial accounting. It refers to the amount paid or exchanged by an investor to acquire an asset, such as a security.
Identify the key options provided in the problem: (1) The market value of the security at year-end, (2) The dividends received from the security, (3) The purchase price paid for the security, and (4) The interest earned on the security.
Analyze each option: The market value at year-end is a valuation metric, not the initial amount paid. Dividends and interest are returns earned after the purchase, not the consideration given.
Focus on the correct option: The purchase price paid for the security represents the actual amount exchanged by the investor to acquire the security. This is the consideration given.
Conclude that the purchase price paid for the security is the correct answer, as it directly reflects the initial investment made by the investor to acquire the security.
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