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

Question

Quizplus · Accepted Answer

When using the indirect method to prepare the statement of cash flows, a gain from the sale of equipment is deducted from net income in the operating activities section. This adjustment is made because the gain is included in the net income calculation but does not involve an actual cash inflow from operating activities. The cash flow from the sale of the equipment itself is reflected in the investing activities section.

A Company Uses the Indirect Method to Prepare the Statement