When Preparing the Financial Statements for 2021, Bart Butler, CFO

question 114

Multiple Choice

When preparing the financial statements for 2021, Bart Butler, CFO for Bartender Inc., noticed that during the year the company sold equipment with an original cost of $ 50,000 for cash proceeds of $ 18,000. At the time of the sale, the equipment had a carrying amount of $ 20,000. Bartender uses the direct method to prepare its cash flow statement. The loss on the sale of equipment will

• A) be added to profit in the operating section of the cash flow statement.
• B) be deducted from profit in the operating section of the cash flow statement.
• C) be shown as a cash outflow from investing activities.
• D) not be included in the cash flow statement as it is a noncash charge.

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