A Building with a Book Value of $54,000 Is Sold

question 40

Multiple Choice

A building with a book value of $54,000 is sold for $63,000 cash Using the indirect method, this transaction should be shown on the statement of cash flows as follows:

• A) an increase of $54,000 from investing activities
• B) an increase of $63,000 from investing activities and a deduction from net income of $9,000
• C) an increase of $9,000 from investing activities
• D) an increase of $54,000 from investing activities and an addition to net income of $9,000

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Definitions:

Short-term Creditors

Lenders or entities from whom a company has borrowed money or resources that are to be repaid within one year.

Liquidity

The ability of an asset to be quickly converted into cash or an entity's capacity to meet its immediate and short-term obligations.

Unusual Items

Non-recurring or uncommon transactions that are outside the usual business operation, which might distort the financial statements if not separately disclosed.

Income Statement

A financial statement that reports a company's financial performance over a specific period of time, detailing revenues, expenses, and profits or losses.