On the statement of cash flows, a $20,000 gain on the sale of fixed assets would be
A) added to net income in converting the net income reported on the income statement to cash flows from operating activities
B) deducted from net income in converting the net income reported on the income statement to cash flows from operating activities
C) added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
D) deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

Question

Quizplus · Accepted Answer

The gain on the sale of fixed assets is a non-operating activity and therefore should be deducted from net income in converting the net income reported on the income statement to cash flows from operating activities. This is because the operating section of the cash flow statement only includes cash inflows and outflows from operating activities, while gains and losses on non-operating activities are reported in the investing or financing sections.

On the Statement of Cash Flows, a $20,000 Gain on the Sale