Which of the following statements is false regarding how the cash flow effects of the changes in the equipment and accumulated depreciation accounts would be reported on a statement of cash flows if the indirect method is used to prepare the operating activities section? A) Cash proceeds from the sale of the equipment would be reported as a cash inflow in the investing activities section. B) The cash paid to purchase equipment would be reported as a cash outflow in the investing activities section C) Depreciation expense would be added to net income in the operating activities section. D) A loss on the sale of the equipment would be subtracted from net income in the operating activities section

Question

Quizplus · Accepted Answer

A loss on the sale of the equipment would be added to net income in the operating activities section, not subtracted. This is because a loss on the sale represents a non-cash expense that was not included in the calculation of net income, and thus needs to be added back to arrive at the net cash provided by operating activities.

Which of the Following Statements Is false regarding How the Cash