Question

A building with a book value of $37,771 is sold for $54,543 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as an increase of a.$37,771 from investing activities b.$54,543 from investing activities c.$37,771 from investing activities and an addition to net income of $16,772 d.$54,543 from investing activities and a deduction from net income of $16,772

Answer 1

b.$54,543 from investing activities

Step-by-step explanation:

The disposal of an asset has two effects on the cash flow statement. The first is that the gain/loss from the disposal is recognized in the operating activities segment of the cash flow statement while the cash received from the disposal is recognized as an inflow in the investing activities section of the statement.

As such, where a building with a book value of $37,771 is sold for $54,543 cash, the amount received $54,543 is an inflow in investing activities.

Option b.$54,543 from investing activities