On the Cash Flow Statement Using the Indirect Method, a Loss

question 81

Multiple Choice

On the cash flow statement using the indirect method, a loss on the sale of equipment will

• A) be added to profit in the operating section.
• B) be deducted from profit in the operating section.
• C) appear as an inflow of cash in the investing section.
• D) appear as an outflow of cash in the investing section.

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Definitions:

Lower of Cost

A principle that states inventory should be recorded at the lesser of its historical cost or the current market value, to ensure assets are not overstated.

IFRS

International Financial Reporting Standards, which are international accounting standards set by the International Accounting Standards Board to ensure transparency and comparability of financial statements worldwide.

Direct Costing

An accounting method that only considers variable costs as product costs, while fixed costs are treated as period expenses.

Inventory Errors

Mistakes in accounting for inventory that can lead to inaccuracies in financial reporting, affecting cost of goods sold and net income.