Question

A building with a book value of $42,837 is sold for $55,601 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as an increase of

a.$42,837 from investing activities

b.$42,837 from investing activities and an addition to net income of $12,764

c.$55,601 from investing activities and a deduction from net income of $12,764

d.$55,601 from investing activities

The following information is available from the current period financial statements:

Net income	$137,143
Depreciation expense	22,235
Increase in accounts receivable	16,632
Decrease in accounts payable	28,149

The net cash flow from operating activities using the indirect method is

a.$114,597

b.$70,127

c.$137,143

d.$204,159

Answer 1

Question 1

Correct answer---------c.$55,601 from investing activities and a deduction from net income of $12,764.

Cash received on sale will be shown as inflow of cash for $55601 and gain on sale will be recorded as a deduction in operating section.

Question 2

Correct answer---------a.$114,597

Working

Statement of Cash Flows (Partial)
Cash flows from operating activities:
Net income	$      137,143.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	$        22,235.00
Changes in current operating assets and liabilities:
Increase in accounts receivable	$       (16,632.00)
Decrease in accounts payable	$       (28,149.00)
Net cash flow from operating activities		$ 114,597.00