When calculating the net cash provided by operating activities, a gain on the sale of equipment should:
A)not be used in the calculation.
B)be added to the net income.
C)be subtracted from the net income.
D)be reported in the cash flows from financing activities section.

Question

Quizplus · Accepted Answer

Gains on the sale of equipment are subtracted from net income in the operating activities section of the cash flow statement because these gains are included in the net income calculation but do not represent cash flows from operating activities. They are non-operating gains and need to be removed to calculate the cash generated from operations accurately.

When Calculating the Net Cash Provided by Operating Activities, a Gain