Question

Atlanta Company sold equipment for cash. The income statement shows a gain on the sale of $1020. The net book value of the asset was $3810. Which of the following statements describes the cash effect of the transaction?

a. positive cash flow of $2,790 from sting activities
b. positive cash flow of $4,830 from investing activities
c. negative cash flow of $2,790 for operating activities
d. negative cash flow of $4,830 for financing activities

Answer 1

b. positive cash flow of $4,830 from investing activities

Step-by-step explanation:

Sale of equipment is an investing activities.

Sale value of asset = Book value of asset + Gain on sale of asset

Sale value of asset = $3,810 + $1,020

Sale value of asset = $4,830

Since it is gain on sale of equipment, it is positive cash flow.