Question

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be:

Select one:

a. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities.

b. added to net income in converting the net income reported on the income statement to cash flows from operating activities.

c. added to cash received from the sale to determine cash flows from investing activities.

d. deducted from cash received from the sale to determine cash flows from investing activities.

Answer 1

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be:

Gain on sale of investment is non operating revenue so it should be deducted in cash flow from operating activities

So answer is a. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities.