When a company uses the indirect method to present the statement of cash flows,a gain on the sale of a long-term asset must be subtracted from net income to reconcile to net cash provided by operating activities.

Question

Quizplus · Accepted Answer

The indirect method starts with the net income figure and adjusts it for non-cash items and changes in working capital to arrive at net cash provided by operating activities. Gains on the sale of long-term assets are considered investing activities and therefore must be subtracted from net income to reconcile to net cash provided by operating activities.

When a Company Uses the Indirect Method to Present the Statement