AC Heating & Cooling uses the indirect method to prepare the statement of cash flows.During 2X03,AC Heating & Cooling had $100,000 in net income,which included a gain of $10,000 from the sale of a plant asset.To calculate operating cash flows,AC Heating & Cooling must
A)deduct $10,000 from net income in the operating activities section of the statement of cash flows.
B)add $10,000 to net income in the operating activities section of the statement of cash flows.
C)deduct $10,000 from net income in the investing section of the statement of the statement of cash flows.
D)add $10,000 to net income in the investing section of the statement of cash flows.
E)deduct $10,000 from net income in the financing section of the statement of cash flows.

Question

Quizplus · Accepted Answer

The gain from the sale of a plant asset is a non-operating item and needs to be deducted from net income in the operating activities section of the statement of cash flows to arrive at the operating cash flows. Therefore, deducting $10,000 from net income in the operating activities section of the statement of cash flows is the correct choice.

AC Heating & Cooling Uses the Indirect Method to Prepare