When a fixed asset is sold for other than its book value,which one of the following incorrectly states the effect of this transaction on a company's statement of cash flows?
A)Under the direct method,no gain or loss from the sale of fixed assets is included in the operating activities section.
B)Under the indirect method,gains from the sale of fixed assets are subtracted from net income in the operating activities section.
C)Under the indirect method,losses from the sale of fixed assets are added back to net income to arrive at net cash from operations.
D)Losses and gains from the sale of fixed assets are operating items to be listed in the operating activities section under both the direct and indirect methods.
E)Under both the direct and indirect methods,the sale of a fixed asset would affect the investing activities section.

Question

Quizplus · Accepted Answer

Losses and gains from the sale of fixed assets are operating items and should be listed in the operating activities section under both the direct and indirect methods. Therefore, choices A, B, and C are incorrect. Choice E is also incorrect because the sale of a fixed asset should be included in the investing activities section under the direct method, but not under the indirect method.

When a Fixed Asset Is Sold for Other Than Its