Productivity Enterprises uses the direct method when preparing its statement of cash flows. Productivity sold equipment with a book value of $9,000 at a loss of $1,500. The amount to be reported on the statement of cash flows in the operating activities section is:
A)($1,500).
B)$ 0.
C)$ 7,500.
D)$10,500.

Question

Quizplus · Accepted Answer

When using the direct method, the cash inflows and outflows are reported separately. Since the sale of the equipment with a loss of $1,500 does not involve cash, it should not be included in the operating activities section. Therefore, the amount to be reported in the operating activities section is $0.

Productivity Enterprises Uses the Direct Method When Preparing Its Statement