At the end of 2015,Schenck Corporation sold its only piece of equipment for $9,000 cash,a price which resulted in a loss of $3,000.During 2015,depreciation expense recognized by Schenck was $1,000.Schenck uses the indirect method to compute net cash flow from operating activities.In reconciling net income to net cash flow from operating activities under the indirect method,the required adjustments based upon the given data:
A)Increase net income by $4,000.
B)Increase net income by $1,000.
C)Decrease net income by $4,000.
D)Increase net income by $3,000.

Question

Quizplus · Accepted Answer

The sale of equipment resulted in a loss of $3,000, which means that the book value of the equipment was $3,000 less than the cash received. This loss will be added back to net income when reconciling to net cash flow from operating activities. Additionally, depreciation expense of $1,000 was recognized during the year, which is a non-cash expense that will be added back to net income. Therefore, the total adjustment to net income is $3,000 + $1,000 = $4,000.

At the End of 2015,Schenck Corporation Sold Its Only Piece