Atkins Corporation has provided the following information for the year ended December 31,2010:
The equipment account balance increased $200,000.
The equipment accumulated depreciation account increased $35,000.
Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
Depreciation expense on the equipment recorded during the year was $65,000.
Which of the following statements is incorrect with respect to preparation of the statement of cash flows? Assume that the equipment purchase and sale resulted in cash flows.
A)A $30,000 cash inflow is reported from the equipment sale.
B)Using the indirect method, net income is increased by the $65,000 depreciation expense.
C)Using the indirect method, net income is decreased by the $10,000 gain on the sale of the equipment.
D)A $60,000 cash inflow is reported from the equipment sale.

Question

Atkins Corporation has provided the following information for the year ended December 31,2010:
The equipment account balance increased $200,000.
 The equipment accumulated depreciation account increased $35,000.
Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
Depreciation expense on the equipment recorded during the year was $65,000.
Which of the following statements is incorrect with respect to preparation of the statement of cash flows? Assume that the equipment purchase and sale resulted in cash flows.
A)A $30,000 cash inflow is reported from the equipment sale.
B)Using the indirect method, net income is increased by the $65,000 depreciation expense.
C)Using the indirect method, net income is decreased by the $10,000 gain on the sale of the equipment.
D)A $60,000 cash inflow is reported from the equipment sale.

Quizplus · Accepted Answer

The sale of the equipment resulted in a cash flow of $30,000. The selling price ($30,000) exceeded the equipment book value* ($20,000) by the gain ($10,000).*Cost ($50,000) - Accumulated depreciation ($65,000 - $35,000)

Atkins Corporation Has Provided the Following Information for the Year