A Company Uses the Indirect Method to Prepare the Statement

question 27

Multiple Choice

A company uses the indirect method to prepare the statement of cash flows.It sold a piece of equipment at a loss 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 $14,000 are subtracted from net income.
• B)Cash proceeds of $14,000 are added to net income.
• C)The loss of $3,600 is added to net income.
• D)The loss of $3,600 is subtracted from net income.

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Definitions:

Quantity Supplied

The total amount of a specific good or service that producers are willing and able to sell at a given price over a certain period of time.

Resource Costs

The total expenses incurred in the production and acquisition of resources, including raw materials, labor, and capital.

Ceiling Price

The maximum price set by a government or regulatory body for essential goods, above which they cannot be sold to prevent exploitation.

Competitive Market

A market structure characterized by many buyers and sellers, freedom of entry and exit, and products that are similar, leading to competition.