Kevin Woodworking Company is preparing its statement of cash flows using the ind
ID: 2586618 • Letter: K
Question
Kevin Woodworking Company is preparing its statement of cash flows using the indirect method. During the year, Kevin sold equipment for $5,990 cash. The net book value of the asset was $4,970. Which of the following statements is true.
.
The gain on sale of $1,020 is shown as a positive cash flow in the financing activities section.
B.
The gain on sale of $1,020 is added back to net income in the operating activities section.
C.
The book value of the assets sold is shown as a negative cash flow in the investing activities section.
D.
The cash receipt of $5,990 is shown as a positive cash flow in the investing activities section.
Explanation / Answer
gain on sale=(5990-4970)=$1020
Hence such gain on sale is subtracted from net income in the operating activities section.Cash receipt of $5990 would be added to cash flow in the investing activities section.
Hence the correct option is D
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