When Computing the Gain or Loss on the Sale of a Plant

question 140

True/False

When computing the gain or loss on the sale of a plant asset, the annual depreciation for the year of sale must be considered, but if the amount is small, this amount can be ignored.

---

Definitions:

Direct Method

The direct method in accounting refers to a way of reporting cash flows from operating activities by directly listing major classes of gross cash receipts and payments.

Indirect Method

A technique used in cash flow statement preparation where net income is adjusted for non-cash transactions and changes in working capital to arrive at operating cash flow.

Financing Activity

Transactions and events where cash is raised or repaid to investors, such as issuing stock, borrowing money, or paying dividends.

Treasury Stock

Shares of a company's own stock that it has reacquired from shareholders and are not currently outstanding.