A Company Uses the Indirect Method to Prepare the Statement

question 129

Multiple Choice

A company uses the indirect method to prepare the statement of cash flows. It sold a piece of land at a gain of $3,600. The equipment was purchased several years ago for $70,500 and had accumulated depreciation of $52,900. What is reported under the operating activities section on the statement of cash flows?

• A)Cash proceeds of $21,200 are subtracted from net income.
• B)Cash proceeds of $21,200 are added to net income.
• C)The gain of $3,600 is added to net income.
• D)The gain of $3,600 is subtracted from net income.

---

Definitions:

Work in Process Inventory

Items or materials that are partway through the production process but not yet completed, representing a current asset on the balance sheet.

Finished Goods Inventory

Items that have completed the manufacturing process and are ready for sale to customers.

Direct Labour

Direct Labour refers to the work exerted by employees who are directly involved in the production of goods or services.

Work in Process

Inventory that includes all items that are in the process of being produced but are not yet complete.