Poole Industries Prepares Its Cash Flow Statement Using the Direct

question 22

Multiple Choice

Poole Industries prepares its cash flow statement using the direct method.Poole sold equipment with a book value of $7,000 at a gain of $2,500.The amount to be reported on the cash flow statement under operating activities is:

• A) $2,500
• B) $7,000
• C) $9,500
• D) This is not an operating activity.

---

Definitions:

Accounting Break-even Quantity

The number of units that must be sold to cover all costs, both fixed and variable, with no profit or loss.

Variable Costs

Outgoings that are contingent upon the scale of production operations.

Fixed Costs

These are expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Required Return

The minimum rate of return an investor expects to achieve by investing in a particular asset.