If a company uses the indirect method to prepare the statement of cash flows, how will a loss from the sale of equipment be presented on the statement of cash flows?
A)A loss from the sale of equipment will be added to net income in the operating activities section in the statement of cash flows.
B)A loss from the sale of equipment will be an addition in the financing activities section in the statement of cash flows.
C)A loss from the sale of equipment will be deducted from net income in the operating activities section in the statement of cash flows.
D)A loss from the sale of equipment will be an addition in the investing activities section in the statement of cash flows.

Question

Quizplus · Accepted Answer

A loss from the sale of equipment is added back to net income in the operating activities section when using the indirect method because it is a non-cash expense that reduced net income on the income statement.

If a Company Uses the Indirect Method to Prepare the Statement