Question

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n): a) subtraction from net income. b) addition to net income. c) addition to cash flow from investing activities. d) subtraction from cash flow from investing activities.

Answer 1

Answer: A - Addition to net income under the operating activities

Explanation: Under the indirect method of cash flow, loss on the sale of equipment will be treated under the operating activities.

Here, the loss will be added under the operating activities of the organisation because it is a loss.

While a profit on sale of equipment will be deducted under the operating activities.