Question

ones Company elected to use the cumulative earnings approach for distributions from its equity-method investment purchased at the beginning of 20X1. During 20X1, Jones earned $200,000 on the investment and received $210,000 in dividends. In the operating activities section of the statement of cash flows prepared under the direct method, Jones reports dividends of: Multiple Choice

Answer 1

Answer: $210,000

Explanation:

The cash flow statement deals with actual cash being transacted. If the company received $210,000 in dividends, this came as actual cash and will therefore be the amount recorded as being received as dividends under the operating activities section of the cash flow statement.

Return on investment is usually an unrealized figure which means that it is a non-cash transaction and so will not reflect in the cashflow statement.