A company uses the indirect method to prepare the statement of cash flows.It sold a piece of equipment at a loss of $3,600.The equipment was purchased several years ago for $70,500 and had accumulated depreciation of $56,900.What is reported under the operating activities section on the statement of cash flows?
A)Cash proceeds of $10,000 are subtracted from net income.
B)Cash proceeds of $10,000 are added to net income.
C)The loss of $3,600 is subtracted from net income.
D)The loss of $3,600 is added to net income.

Question

Quizplus · Accepted Answer

In the indirect method, non-cash losses are added back to net income in the operating activities section. The $3,600 loss on the sale of equipment is added back to net income.

A Company Uses the Indirect Method to Prepare the Statement