Question

When preparing the operating activities section of the statement of cash flows using the indirect method, how should the transaction of selling a building with a book value of 47,557 for58,235 cash be shown on the statement of cash flows?

Answer 1

When preparing the operating activities section of the statement of cash flows using the indirect method, the transaction of selling a building with a book value of $47,557 for $58,235 cash should be shown as an increase in cash and a decrease in the book value of the building.

Step-by-step explanation:

When preparing the operating activities section of the statement of cash flows using the indirect method, the transaction of selling a building with a book value of $47,557 for $58,235 cash should be shown as follows:

• Increase in cash ($58,235)
• Increase in the book value of the building ($47,557)
• Decrease in the book value of the building ($47,557)

The net effect is an increase in cash flow of $10,678 ($58,235 - $47,557).