Question

Assume a company sold a piece of equipment for $3,000. The original cost was $15,000 and the accumulated depreciation prior to the sale was $10,000. What amount, if any, would appear in the operating activities section of the statement of cash flows using the indirect method?

Answer 1

Answer:

The amount of $2000 (loss on sale) would be added to the reported profit under the operating section of the statement of cash flow

Explanation:

With the sale of an asset, the reported profit would have been increased or decreased by the amount of gains or losses realized on the sale of the equipment

Gain/loss on sale = sales value - Carrying amount

Carrying amount = cost - accumulated deprecation

                      = $15,000 - $10,000

                      = $5,000

Loss on depreciation = 3,000 -5,000

                                   = ($2000)

The amount of $2000 would be added to the reported profit under the operating section of the statement of cash flow