The gain resulting from the sale of equipment shown when using the indirect method to prepare the statement of cash flows is reported in the:
A) operating section as a deduction.
B) investing section as a deduction.
C) operating section as an addition.
D) investing section as an addition.

Question

Quizplus · Accepted Answer

In the indirect method of preparing the statement of cash flows, gains from the sale of equipment are deducted from net income in the operating section to reconcile net income to net cash provided by operating activities. This is because the gain increases net income but does not affect cash flows from operating activities.

The Gain Resulting from the Sale of Equipment Shown When