On the statement of cash flows prepared using the indirect method, a $7,500 gain on the sale of fixed assets would be
A) added to net income in converting the net income reported on the income statement to cash flows from operating activities
B) deducted from net income in converting the net income reported on the income statement to cash flows from operating activities
C) added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
D) deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

Question

Quizplus · Accepted Answer

The gain on the sale of fixed assets is a non-operating activity and should be accounted for in the cash flows from investing activities section of the statement of cash flows. It should be deducted from net income in converting the net income reported on the income statement to cash flows from operating activities since it is not cash generated by operating activities.

On the Statement of Cash Flows Prepared Using the Indirect