Final answer:
The cash proceeds from the sale of machinery in the Thelonious Company are reported under the investing activities section of the statement of cash flows when using the indirect method.
Step-by-step explanation:
The sale of machinery in the Thelonious Company involves reporting the transaction on the company's statement of cash flows.
When using the indirect method for preparing the statement, cash flows from operating activities start with net income and then adjustments are made for changes in items that affect net income but do not involve actual cash flows. However, the sale of machinery is not an operating activity; it is an investing activity.
The cash proceeds from the sale of machinery, which are totaled at $5,000, would be reported in the investing activities section. This is because the machinery is a long-term asset, and its sale affects the company's long-term investment decisions.
The book value of the machinery does not directly impact the statement of cash flows—it is more relevant for calculating any gain or loss on the sale of the asset, which would be reported in the income statement, not the statement of cash flows.