Which of the following adjustments to net income is correct when using the indirect method for computing cash flows from operating activities?
A) Subtract losses from sales of securities.
B) Add an increase in accounts receivable.
C) Subtract gains from sales of equipment.
D) Deduct an increase in accounts payable.

Question

Quizplus · Accepted Answer

Gains from sales of equipment are subtracted from net income because they are non-operating gains that are included in net income but do not affect cash flow from operating activities.

Which of the Following Adjustments to Net Income Is Correct