If a company uses the direct method of calculating cash flows from operating activities,it must adjust net income for gains or losses when selling property,plant,and equipment.A company must make adjustments for gains and losses only when the indirect method is used to present cash flows from operating activities.

Question

Quizplus · Accepted Answer

When using the direct method, a company must still make adjustments for gains and losses when selling property, plant, and equipment in the cash flows from operating activities section. However, these adjustments are not required in the indirect method.

If a Company Uses the Direct Method of Calculating Cash