Use the information below to answer the following three (3) questions: During 20

ID: 2438189 • Letter: U

Question

Use the information below to answer the following three (3) questions:

During 2005, XYZ Company sold equipment for $5,000. The equipment cost $20,000 and had accumulated depreciation of $12,000 at the time of sale.

1. The sale resulted in a:

a. Gain

b. Loss

2. The amount of the gain or loss is:

3. In a statement of cash flows presented using the indirect method:

a. $20,000 is added to the investing activities section

b. $20,000 is added to the operating activities section

c. $5,000 is added to the investing activities section

d. $5,000 is deducted from the investing activities section

e. None of the above

Book value as on date of sale=($20000-$12000)=$8000

Hence since sale proceeds is lower than the book value at the time of sale;

1.The sale resulted in a Loss

2.Loss=(8000-5000)=$3000

3.The sale proceeds results in cash inflows in the investing section of the cash flow statement for the period.Hence the correct option is C.

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