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

Question

Quizplus · Accepted Answer

The gain from the sale of equipment is an example of a non-operating item and should be presented in the operating activities section of the statement of cash flows. However, it should be deducted from net income as it is not an actual operating cash inflow. Therefore, choice D is the correct answer.

A Company Uses the Indirect Method to Prepare the Statement