In calculating cash flows provided (used) by operating activities using the indirect method, a loss on the sale of equipment is
A)added to net income.
B)deducted from net income.
C)ignored because it does not affect cash.
D)not reported on a statement of cash flows.

Question

Quizplus · Accepted Answer

A loss on the sale of equipment is added back to net income when using the indirect method to calculate cash flows from operating activities. This is because the loss is a non-cash expense that reduced net income, but did not involve an outflow of cash in the operating activities section.

In Calculating Cash Flows Provided (Used) by Operating Activities Using