A fire damaged Francisco Corp.'s office building. The company received $ 600,000 as a settlement from their insurance company, which was $ 180,000 less than the book value of the building. Their income tax rate is 25%. On the statement of cash flows (indirect method), the receipt from the insurance company should

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The receipt of $600,000 from the insurance company relates to the damages to the office building, which is a non-operating activity and should be categorized as an investing activity. The amount received is equal to the settlement amount and should be shown as an inflow from investing activities of $600,000 on the statement of cash flows (indirect method). The $180,000 difference between the settlement amount and book value is not relevant for the statement of cash flows. Also, since the settlement amount is greater than the book value of the building, no loss should be recognized on the income statement, and therefore, it should not be added to net income.

A Fire Damaged Francisco Corp