Why are gains and losses from asset sales removed from net income when calculating the cash...
Why are gains and losses from asset sales removed from net income when calculating the cash flows from operating activities?
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a. |
Selling assets is a noncash item. |
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b. |
Gains and losses from asset sales are a financing activity. |
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c. |
Gains and losses are not removed from net income when calculating the cash flows from operating activities |
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d. |
The entire proceeds from sales of long-lived assets are included in investing activities. |
Homework Answers
While preparing Income Statement the gain or loss related to sales of asset is included in Net Income.
Any proceeds from sale of long lived assets is a Investing Activity. So while preparing Cash Flow Statement the same is removed from Cash Flows from Operating Activities.
Hence, the entire proceeds from sales of long lived assets are included in investing activities.
The correct option is d.
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