In calculating cash flows provided (used) by operating activities using the indirect method, a gain on the sale of equipment is
A)added to net income.
B)deducted from net income.
C)ignored because it does not affect cash.
D)not reported on a statement of cash flows.

Question

Quizplus · Accepted Answer

In the indirect method of calculating cash flows from operating activities, non-cash items such as gains on the sale of equipment are deducted from net income. This is because the gain increases net income but does not involve an actual cash inflow from operating activities; it's related to an investing activity.

In Calculating Cash Flows Provided (Used) by Operating Activities Using