Under the direct method of determining net cash provided by operating activities on the statement of cash flows, a gain on the sale of plant assets would be:
A) added to the amount of operating expenses reported under the accrual basis.
B) deducted from the amount of operating expenses reported under the accrual basis.
C) deducted from the amount of sales reported under the accrual basis.
D) totally ignored since the gain is not a part of sales, cost of goods sold, or operating expenses.

Question

Quizplus · Accepted Answer

Under the direct method, gains from the sale of plant assets are not included in operating cash flows as they are considered investing activities, not operating activities.

Under the Direct Method of Determining Net Cash Provided by Operating