Question

A machine with a cost of $148,000 and accumulated depreciation of $94,000 is sold for $68,000 cash. The amount that should be reported in the operating activities section reported under the direct method is:___________.

Answer 1

Answer:

Zero

Explanation:

There are three types of activities in the cash flow statement which are described below:  

1. Operating activities: It includes those transactions which records cash payments and cash receipts. Like - collection, wages, etc.  

2. Investing activities: It records those activities which include purchase and sale of the long term assets. The purchase is an outflow of cash whereas sale is an inflow of cash .

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance. The issue of shares is an inflow of cash whereas redemption and dividend is an outflow of cash.

The sale of machine is an investing activity. Hence no amount would be reported i.e zero amount would be recorded