Governance Corporation uses the direct method when preparing its statement of cash flows. Governance sold equipment with a carrying amount of $13,000 at a loss of $3,000. The amount to
Be reported on the statement of cash flows under "proceeds from the sale of capital assets" is:
A) $10,000
B) $3,000
C) $13,000
D) $16,000

Question

Quizplus · Accepted Answer

The carrying amount and loss on the sale of equipment are irrelevant when using the direct method. The only amount to be reported under "proceeds from the sale of capital assets" is the actual cash received from the sale, which in this case is $10,000.

Governance Corporation Uses the Direct Method When Preparing Its Statement