When using the indirect method, a loss on the sale of equipment should be added to proﬁt to derive cash ﬂows from operating activities.

Question

Quizplus · Accepted Answer

In the indirect method of cash flow statement preparation, non-cash expenses and losses, such as a loss on the sale of equipment, are added back to net income to adjust for the fact that these items reduced net income but did not involve an outflow of cash during the period.

When Using the Indirect Method, a Loss on the Sale