Southern Industries Corporation uses the direct method when preparing its statement of cash flows. Southern Industries sold equipment with a book value of $15,000 at a loss of $2,000. The amount to be reported on the statement of cash flows under "proceeds from the sale of plant assets" is:
A)$15,000.
B)$17,000.
C)$ 2,000.
D)$13,000.

Question

Quizplus · Accepted Answer

The proceeds from the sale of the plant asset will be the cash received from the sale, which in this case will be less than the book value due to the loss. Therefore, the amount to be reported on the statement of cash flows under "proceeds from the sale of plant assets" is the cash received, which is $13,000 ($15,000 book value - $2,000 loss).

Southern Industries Corporation Uses the Direct Method When Preparing Its