Pecan Company Sold a Computer for $50,000

question 51

Multiple Choice

Pecan Company sold a computer for $50,000. The computer's original cost was $250,000, and the accumulated depreciation at the date of sale was $180,000. The sale of the computer should appear on Pecan's annual statement of cash flows (indirect method) as

• A) a reduction in cash flows from operating activities of $20,000 and an increase in cash flows from investing activities of $50,000.
• B) an increase in cash flows from operating activities of $20,000 and an increase in cash flows from investing activities of $50,000.
• C) a reduction in cash flows from operating activities of $20,000 and an increase in cash flows from investing activities of $70,000.
• D) an increase in cash flows from operating activities of $20,000 and an increase in cash flows from investing activities of $70,000.

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Definitions:

Blanket Liens

A legal claim allowing a lender to seize nearly all of a borrower's assets if they default on a loan.

Chattel Mortgage

A loan arrangement in which an item of movable personal property acts as security for the loan, often used in the financing of vehicles and equipment.

Speculative Demand

The demand for a good or asset based on expectations of future price changes, rather than its intrinsic value or productive use.

Unexpected Opportunities

Unforeseen chances or prospects that arise, potentially beneficial for decision-making or strategic planning.