Final answer:
To determine the total related to the sold machine on the cash flow statement, calculate the machine's book value and compare it to the sale price. The loss on sale and the depreciation expense are added back to net income in the cash flows from operating activities. The total amount is therefore the depreciation expense of $26,500 plus the loss on sale of $8,800, summing up to $35,300.
Step-by-step explanation:
To calculate the total amount related to the machine that should be reported in the operating section of the statement of cash flows under the indirect method, we need to consider the gain or loss from the sale of the machine. First, we determine the machine's book value, which is the cost of the machine minus the accumulated depreciation. Then, we compare the book value to the sale proceeds to find out if there was a gain or loss on the sale.
- Cost of the machine: $168,000
- Accumulated Depreciation: $104,000
- Book Value: Cost - Accumulated Depreciation = $168,000 - $104,000 = $64,000
- Sale Proceeds: $55,200
- Loss on Sale: Book Value - Sale Proceeds = $64,000 - $55,200 = $8,800
When using the indirect method, we start with the net income and adjust it for non-cash expenses such as depreciation. However, since there is a loss on the sale of the machine, this amount will be added back to net income since the cash flow from operations will be higher than net income by the amount of the loss.
Therefore, the total amount related to the machine that should be reported in the operating section of the statement of cash flows is the current year depreciation expense $26,500 plus the loss on sale of the machine $8,800, which totals $35,300.