sar How will the journal entries that result in a realized gain on AFS securities impact the cash flow atement when using the indirect method for operating cash flows? . a Cash inflow from investing activities 2. the gain reduces cash flow from operating activities 3. a cash outflow from investing activities A) 1 only B) 2 only C) 3 only D) 1 &2 E) 2&3 F) Neither 1, 2, nor 3 will occur. 14. A compensating balance at a bank serving as collateral on a long-term note payable would be best classified as: A) Cash B) Cash equivalent C) Restricted cash D) Current Liability E) Long-term liability 15. Which of the following best summarizes the direct write-off approach to accounting for bad debt: A) It is a superior application of the matching principle (expense recognition principle) B) It results in a better estimate of the net realizable value of receivables. C) It is not allowed under GAAP unless A/R and/or bad debt is immaterial. D) All of the above summarize the direct write-off approach. E) None of the above summarizes the direct write-off approach