Question

A corporation uses the indirect method for preparing the Statement of Cash Flows. A fixed asset has been sold for $25,000 representing a gain of $4,500. The value in the operating activities section regarding this event would be:

a. $25,000
b. ($4,500)
c. $4,500
d. $29,500

Answer 1

Answer:

b. ($4.500)

Explanation:

The gain on sale of fixed assets would be deducted from the net income to arrive at the cash flow from operating activities as it is an increase in net income for the period. Any non cash expenses such as depreciation is added back while non cash revenues deducted to compute net cash flow from operating activities.