In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is
A) added to net income
B) deducted from net income
C) ignored because it does not affect cash
D) reported supplementally as a noncash investing and financing activity

Question

Quizplus · Accepted Answer

A gain on the sale of equipment is a non-operating item and does not reflect the cash inflow or outflow from the normal operations of the business. Therefore, it needs to be deducted from net income in order to arrive at the cash flows from operating activities using the indirect method.

In Calculating Cash Flows from Operating Activities Using the Indirect