A Loss on the Sale of Machinery Should Be Reported

question 83

Multiple Choice

A loss on the sale of machinery should be reported in the statement of cash flows as:

• A) An adjustment to net income under the indirect method.
• B) An operating activity under the direct method.
• C) An investing activity cash outflow.
• D) A noncash investing activity.

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Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, helping to prepare the books for the next period.

Reversing Entries

Journal entries made at the beginning of an accounting period to reverse certain adjusting entries made in the previous period.

T-Accounts

A graphic representation of a general ledger account that outlines the debit and credit sides to visualize the effect of transactions on the account.

Reversing Entries

Entries executed at the onset of an accounting cycle to annul or reverse the adjusting records that were established at the end of the last period.