When Using the Indirect Method, the Gain from Selling a Long-Term

question 28

Multiple Choice

When using the indirect method, the gain from selling a long-term investment is recognized in which of the following?

• A) In the operating activity section and the investing activity section of the statement of cash flows.
• B) In the financing activity section of the statement of cash flows.
• C) In the noncash investing or financing activity supplemental section of the statement of cash flows.
• D) Gains are not recognized in the statement of cash flows under the indirect method.

---

Definitions:

EAR

Effective Annual Rate; the real return on an investment, taking into account the effect of compounding interest.

APR

Annual Percentage Rate, representing the yearly interest rate charged on borrowed money.

Total Payments

The cumulative amount of money paid out or expected to be paid out over the duration of an agreement or loan.

Present Value Factor

A factor used to calculate the present value of a future amount, reflecting the time value of money.