On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be:
A) deducted from net income in converting the net income reported on the income statement to cash flows from operating activities.
B) added to net income in converting the net income reported on the income statement to cash flows from operating activities.
C) added to cash received from the sale to determine cash flows from investing activities.
D) deducted from cash received from the sale to determine cash flows from investing activities.

Question

Quizplus · Accepted Answer

Gains on the sale of investments are deducted from net income in the operating activities section of the cash flow statement when using the indirect method. This is because the gain increases net income on the income statement, but it does not affect cash flows from operating activities; it is related to investing activities.

On the Statement of Cash Flows Prepared by the Indirect