When using the indirect method to determine operating cash flows, where is the gain from selling a long-term investment recognized? (The proceeds from selling the investment are considered separately.)
A)operating activity
B)investing activity
C)financing activity
D)noncash investing or financing activity
E)not reported on the statement of cash flows

Question

Quizplus · Accepted Answer

Gains from selling long-term investments are recognized in the operating section of the cash flow statement when using the indirect method. This is because the gain is subtracted from net income to adjust for the fact that it did not provide cash from operating activities.

When Using the Indirect Method to Determine Operating Cash Flows