When preparing a statement of cash flows using the indirect method, which of the following is correct?
A) The declaration of a cash dividend should be a use of cash in the financing activities section.
B) The issuance of a stock dividend should be a use of cash in the financing activities section.
C) The purchase of land and a building by issuing a long-term note payable should be a source of cash in the financing activities section.
D) Proceeds from the sale of equipment should be added to net income in the operating activities section.
E) A loss on the sale of land should be added to net income in the operating activities section.

Question

Quizplus · Accepted Answer

A loss on the sale of land is added back to net income in the operating activities section because it is a non-cash charge that reduced net income but did not affect cash.

When Preparing a Statement of Cash Flows Using the Indirect