Question

A machine with a cost of $144,000, current year depreciation expense of $20,500 and accumulated depreciation of $92,000 is sold for $45,600 cash. The total amount that should be reported in the operating section of the statement of cash flow in, indirect method is: a. $20,500. b. $4,560. c. $66,100. d. $18,900. e. $26,900.

Answer 1

a. $20,500

Step-by-step explanation:

The cashflow using the indirect method has basically 3 segments namely; Cashflow from operating activities, Cashflow from investing activities and Cashflow from financing activities.

Cashflow from operating activities considers the net profit before tax and then adjustments for non cash items like depreciation. Hence from the question given, the current year depreciation ($20,500) is a part of the Cashflow from operating activities.

Other cost elements stated in the question are considered under investing activities.