How Should a Gain on the Sale of Equipment Be

question 21

Multiple Choice

How should a gain on the sale of equipment be reflected in the operating section of the Statement of Cash Flows when using the indirect method?

• A)as a deduction from net income
• B)as a cash inflow
• C)as an addition to net income
• D)It is not reflected in the operating section.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often with dividend payment preferences.

Stock Dividend

A dividend payment made to shareholders in the form of additional shares of stock rather than cash.

Corporation's Directors

Individuals elected by a corporation's shareholders to oversee the management and make major business decisions on behalf of the shareholders.

Stockholders

Individuals or entities that own one or more shares of stock in a corporation, thereby holding a portion of the company's ownership.