Kevin Woodworking Company is preparing its statement of cash flows using the indirect method.During the year,Kevin sold equipment for $7,490 cash.The net book value of the asset was $4,670.Which of the following statements is true?
A)The gain on sale of $2,820 is added back to net income in the operating activities section.
B)The book value of the assets sold is shown as a negative cash flow in the investing activities section.
C)The cash receipt of $7,490 is shown as a positive cash flow in the investing activities section.
D)The gain on sale of $2,820 is shown as a positive cash flow in the financing activities section.

Question

Quizplus · Accepted Answer

When an asset is sold, the cash receipt is shown as a positive cash flow in the investing activities section. Therefore, choice C is correct. Choice A is incorrect because the gain on sale is added back to net income in the investing activities section, not the operating activities section. Choice B is incorrect because the book value of the asset sold is not shown in the cash flow statement. Choice D is incorrect because the gain on sale is not shown in the financing activities section.

Kevin Woodworking Company Is Preparing Its Statement of Cash Flows