In its 2013 income statement, WME reported a $40,000 loss on the sale of equipment. In its reconciliation schedule, WME should:
A)Report a $40,000 cash outflow for the direct method.
B)Show a $40,000 positive adjustment to net income under the indirect method.
C)Show a $40,000 negative adjustment to net income under the indirect method.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Under the indirect method, a loss on the sale of equipment is added back to net income because it is a non-cash expense that reduced net income.

In Its 2013 Income Statement, WME Reported a $40,000 Loss