Martin Company Sold Equipment for Cash

question 10

Multiple Choice

Martin Company sold equipment for cash. The income statement shows a gain on sale of $920. The net book value of the asset prior to sale was $3,510. Which of the following statements describes the cash effect of the transaction?

• A)negative cash flow of $4,430 for financing activities
• B)negative cash flow of $2,590 for operating activities
• C)positive cash flow of $4,430 from investing activities
• D)positive cash flow of $2,590 from investing activities

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Definitions:

Joint Tenants

Co-owners of property who have equal rights to the whole property and a right of survivorship, meaning if one owner dies, the remaining owner(s) inherit the deceased's share directly.

Right Of Survivorship

A feature of some types of co-ownership of property causing a co-owner’s interest in property to be transferred on his death immediately and by operation of law to his surviving co-owner(s). See also tenancy by the entirety and joint tenancy.

Tenancy In Common

A form of co-ownership of property that is freely disposable both during life and at death, and in which the co-owners have undivided interests in the property and equal rights to possess the property.

Right Of Survivorship

A legal principle in property law where, upon the death of one owner, the ownership interest of the deceased automatically transfers to the surviving owner(s) without the need for probate.