Use the following information for questions 102 and 103.
A flood damaged a building and contents. Floods are unusual and infrequent in this area. The receipts from insurance companies totaled $500,000, which was $150,000 less than the book values. The tax rate is 30%.
-On the statement of cash flows (indirect method), the receipts from insurance companies should
A) be shown as an addition to net income of $350,000.
B) be shown as an inflow from investing activities of $350,000.
C) be shown as an inflow from investing activities of $500,000.
D) not be shown.

Question

Quizplus · Accepted Answer

The receipts from insurance companies for the flood damage should be shown as an inflow from investing activities of $500,000 on the statement of cash flows (indirect method) because it is related to the recovery of a loss on a long-term asset, which is considered an investing activity. The amount is the actual cash received, not the net of the book value.

Use the Following Information for Questions 102 and 103