Company is preparing its statement of cash flows using the indirect method. Duri

Question

Company is preparing its statement of cash flows using the indirect method. During the year, they sold equipment for $7,990 cash. The net book value of the asset was $4770. Which of the following statement is true. A)The gain on the sale of $3220 is shown as a positive cash flow in the financing activites section. B)The cash receipt of $7990 is shown as a positive cash flow in the investing activities section. C)The gain on sale $3220 is added back to net income in the operating activities section. D)The book value of the assets sold is shown as a negative cash flow in the investing activities section.

Explanation / Answer

B)The cash receipt of $7990 is shown as a positive cash flow in the investing activities section.   Statement showing computations Particulars Amount Sale Value of Equipment                           7,990.00 Book Value of the asset                         (4,770.00) Net Gain on Sale                           3,220.00 Gain on sale will shown as reduction from net income under operating activities section Sale value would be shown as cash inflow from investing activities

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