When using the indirect method to complete the cash flows from operating activities section of the statement of cash flows,what is the proper disposition of a loss on disposal of equipment?
A)Disregard the loss because it relates to an investing activity.
B)Disregard the loss because it relates to a financing activity.
C)Add the loss to net income.
D)Subtract the loss from net income.

Question

Quizplus · Accepted Answer

Because losses decrease net income,but do not use cash for operating activities,losses are added back to net income to arrive at net cash flows from operating activities.

When Using the Indirect Method to Complete the Cash Flows