Using the indirect method of preparing a statement of cash flows, a loss on the sale of a capital asset is:
A) ignored
B) subtracted in the operating activities section
C) added in the operating activities section
D) added in the investing activities section

Question

Quizplus · Accepted Answer

The loss on the sale of a capital asset is a non-cash expense and is added back to net income in the operating activities section of the statement of cash flows using the indirect method. This is because the loss reduces net income, but does not affect the actual cash flow of the business.

Using the Indirect Method of Preparing a Statement of Cash