A Company Uses the Indirect Method to Prepare the Statement

question 53

Multiple Choice

A company uses the indirect method to prepare the statement of cash flows. It sold a piece of equipment at a gain of $5600. The equipment was purchased several years ago for $75,500 and had accumulated depreciation of $58,900. What is reported under the operating activities section on the statement of cash flows?

• A)Cash proceeds of $22,200 are subtracted from net income.
• B)Cash proceeds of $22,200 are added to net income.
• C)The gain of $5600 is added to net income.
• D)The gain of $5600 is subtracted from net income.

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Definitions:

International Transactions

Financial operations that occur across national borders, involving the exchange of goods, services, or capital between countries.

Intermediary

An entity or person that acts as a mediator or link between parties to facilitate a transaction or agreement.