Sonesta Farm equipment Company sold equipment for cash.The income statement shows a loss on sale of $7,000.The net book value of the asset prior to the sale was $26,900.Which of the following statements describes the cash effect of the transaction?

Question

Quizplus · Accepted Answer

The sale of equipment for cash results in a positive cash flow from investing activities. The cash inflow would be equal to the sale price received, which is not given in the question. However, we know that the net book value of the asset was $26,900 and the loss on sale was $7,000. Therefore, we can calculate that the sale price would have been $33,900 (26,900 + 7,000). This means that the cash inflow from this transaction would be $33,900, resulting in a positive cash flow from investing activities. Choices A, B, and C are incorrect because they do not reflect the correct cash flow category or amount for the transaction.

Sonesta Farm Equipment Company Sold Equipment for Cash