A loss on the sale of machinery in the ordinary course of business should be presented in a statement of cash flows prepared under the indirect method as a(n)
A) inflow from operating activities.
B) inflow from investing activities.
C) adjustment to reconcile net income to cash from operating activities.
D) outflow from investing activities.

Question

Quizplus · Accepted Answer

The loss on the sale of machinery in the ordinary course of business is added back to net income in the operating activities section of the cash flow statement when using the indirect method. This is because the loss is a non-cash expense that reduced net income, but it did not affect cash flows.

A Loss on the Sale of Machinery in the Ordinary