Freedom Enterprises uses the direct method in preparing its cash flow statement.Freedom sold machinery with a book value of $36,700 at a loss of $7,200.The amount to be reported on the cash flow statement under "Cash received from sale of property,plant,and equipment" is:
A) $43,900
B) $29,500
C) $36,700
D) $7,200

Question

Quizplus · Accepted Answer

The direct method only reports the actual cash received from the sale of property, plant, and equipment. Therefore, the cash received is the selling price minus the loss on sale, which is $36,700 - $7,200 = $29,500. Therefore, the correct answer is B.

Freedom Enterprises Uses the Direct Method in Preparing Its Cash