Question

A corporation uses the indirect method for preparing the statement of cash flows. A fixed asset has been sold for $23,649 representing a gain of $3,881. The value in the operating activities section regarding this event would be
a. $(3,881)
b. $23,649
c. $27,530
d. $19,768

Answer 1

Answer:

a. $(3,881)

Explanation:

Gain on sale of fixed assets is an income. To be included in the operating section of the cash flow statement, we need to deduct the gain. The disposal of the fixed assets will go to the investing section. As the gain of the sale of assets is already added to the net income in the income statement, it will be deducted to make the accounting procedure transparent. Therefore, option A is correct.