A building with a book value of $54,000 is sold for $63,000 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as an increase of
A) $54,000 from investing activities
B) $63,000 from investing activities and a deduction from net income of $9,000
C) $9,000 from investing activities
D) $54,000 from investing activities and an addition to net income of $9,000

Question

Quizplus · Accepted Answer

The sale of the building resulted in a cash inflow of $63,000, which should be reported as an increase in investing activities. However, since the building had a book value of $54,000, the difference of $9,000 should be deducted from net income as a loss from the sale of the asset. Therefore, the transaction should be reported as an increase of $63,000 from investing activities and a deduction from net income of $9,000 on the statement of cash flows using the indirect method.

A Building with a Book Value of $54,000 Is Sold