A Company Bought $250,000 of Equipment with an Expected Life

question 21

Multiple Choice

A company bought $250,000 of equipment with an expected life of ten years and no residual value.After six years the company sold the equipment for $94,000.If the company uses straight-line depreciation and the indirect method is used to determine cash flows from operating activities,which of the following reflects how the sale of the equipment would be reported in the statement of cash flows?

• A)$94,000 is recorded as a cash inflow from investing activities and no other sections of the statement are affected.
• B)$94,000 is recorded as a cash inflow from investing activities and $6,000 is added to convert net income to net cash flow provided by operating activities.
• C)$94,000 is recorded as a cash inflow from investing activities and $6,000 is subtracted to convert net income to net cash flow provided by operating activities.
• D)$94,000 is recorded as a cash inflow from operating activities.

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Definitions:

Dorsum

The upper surface of an organ or body part, such as the back of the hand or the top side of the foot.

Cranial Nerve

One of the twelve nerves that originate in the brain and supply sensory, motor, or autonomic functions to the head, neck, and in some cases, viscera.

Auscultation

The act of listening to the internal sounds of the body, typically using a stethoscope, as part of a physical examination.

Auscultating

The act of listening to the sounds made by internal organs, especially the heart and lungs, typically using a stethoscope.