In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is
A) added to profit.
B) deducted from profit.
C) ignored because it does not affect cash.
D) not reported on a cash flow statement.

Question

Quizplus · Accepted Answer

A gain on the sale of equipment is deducted from profit when calculating cash flows from operating activities using the indirect method. This is because the gain is a non-cash item that increased reported profit, but it does not affect cash flows from operating activities. The actual cash received from the sale is reflected in the investing activities section of the cash flow statement.

In Calculating Cash Flows from Operating Activities Using the Indirect