What Is the Proper Treatment of a Loss on Disposal

question 118

Multiple Choice

What is the proper treatment of a loss on disposal of equipment when using the indirect method to complete the cash flows from operating activities section?

• A) Disregard the loss because it relates to an investing activity.
• B) Disregard the loss because it relates to a financing activity.
• C) Add the loss to net income.
• D) Subtract the loss from net income.

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Definitions:

Industry Analysis

An examination of the economic and market forces that affect the competitiveness within an industry.

High Exit Barriers

Factors that make it difficult and costly for a company to leave a market or industry.

Undifferentiated Products

Products that are essentially identical in features and quality to those offered by competitors, making differentiation through marketing crucial.

Industry Growth

The increase in production, sales, and the number of companies in a specific sector over time, indicating economic expansion and market potential.