Martin Ceramics Company is preparing its statement of cash flows using the indirect method.During the year,they sold equipment for $5,990 cash.The net book value of the asset prior to sale was $5,550.Which of the following statements is true?

Question

Quizplus · Accepted Answer

The cash receipt of $5,990 from the sale of equipment would be shown as a positive cash flow in the investing activities section, as it is a cash inflow from the sale of a long-term asset. The gain on sale of $440 is a non-cash item and would not be reflected in the cash flow statement. The book value of the asset sold is not relevant for the statement of cash flows. Financing activities refer to activities related to raising or repaying funds, and the sale of equipment does not fall under this category.

Martin Ceramics Company Is Preparing Its Statement of Cash Flows