Illinois Woodworking Company is preparing its statement of cash flows using the indirect method.During the year,Illinois Woodworking sold equipment for $5990 cash.The net book value of the asset was $4970.Which of the following statements is TRUE?
A) The gain on sale of $1020 is added back to net income in the operating activities section.
B) The book value of the asset sold is shown as a negative cash flow in the investing activities section.
C) The cash receipt of $5990 is shown as a positive cash flow in the investing activities section.
D) The gain on sale of $1020 is shown as a positive cash flow in the financing activities section.

Question

Quizplus · Accepted Answer

The cash receipt of $5990 from the sale of equipment is shown as a positive cash flow in the investing activities section of the statement of cash flows. The book value of the asset sold is not shown in the statement of cash flows, nor is the gain on sale of $1020 added back to net income in the operating activities section or shown as a positive cash flow in the financing activities section. Therefore, option C is the correct choice.

Illinois Woodworking Company Is Preparing Its Statement of Cash Flows