Using the indirect method if equipment is sold at a gain the
A) sale proceeds received are deducted in the operating activities section.
B) sale proceeds received are added in the operating activities section.
C) amount of the gain is added in the operating activities section.
D) amount of the gain is deducted in the operating activities section.

Question

Quizplus · Accepted Answer

When using the indirect method for recording the sale of equipment at a gain, the amount of the gain is deducted in the operating activities section. This is because the gain is considered a non-cash item and is therefore added back to the net income in order to arrive at the cash flows from operating activities.

Using the Indirect Method If Equipment Is Sold at a Gain