Why are gains and losses from asset sales removed from net income when calculating the cash flows from operating activities?
A)Selling assets is a noncash item.
B)Gains and losses from asset sales are a financing activity.
C)Gains and losses are not removed from net income when calculating the cash flows from operating activities
D)The entire proceeds from sales of long-lived assets are included in investing activities.

Question

Quizplus · Accepted Answer

Gains and losses from asset sales are removed from net income when calculating cash flows from operating activities because these transactions are considered investing activities, not operating activities. The entire proceeds from the sales of long-lived assets are reported under investing activities to reflect the cash impact of such sales accurately.

Why Are Gains and Losses from Asset Sales Removed from Net