Atlanta Company sold equipment for cash.The income statement shows a gain on the sale of $1020.The net book value of the asset was $3810.Which of the following statements describes the cash effect of the transaction?

Question

Quizplus · Accepted Answer

The gain on the sale of $1020 is added to net income in the operating section, but the actual cash received from the sale is reported in the investing section. Since the equipment was sold for cash, there is a positive cash flow of the sales price ($3810) plus the gain ($1020), resulting in a total cash flow of $4830 from investing activities.

Atlanta Company Sold Equipment for Cash