Question

When using the indirect method to complete the cash flows from operating activities section of the statement of cash flows, what is the proper disposition of a loss on disposal of equipment?.

Answer 1

The correct option is D.

Subtract the loss from net income.

What is Cash Flow?

The volume of money a business brings in and expends is known as cash flow. Revenues from sales are used by businesses to pay expenses.

• In accounting, the initial net cash flow that is recorded during all firm operational operations is calculated using the indirect technique of estimating or computing cash flow.
• Under the indirect technique of completing the cash flow from operating activities, any initial net income or net loss is recorded at the beginning.
• The initial level of net income includes all non-cash expenditures and expenses such as amortization and depreciation of tangible personal property and equipment.

• The cash flow of operating activities is now calculated by deducting any profits or losses from the sale of long-term assets from net income.

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I understand that the question you are looking for is:

When using the indirect method to complete the cash flows from operating activities section of the statement of cash flows, what is the proper disposition of a loss on disposal of equipment? Multiple Choice

A. Add the loss to net income.

B. Disregard the loss because it relates to a financing activity.

C. Disregard the loss because it relates to an investing activity.

D. Subtract the loss from net income.