Question

A loss on sale of equipment is added to net income in determining cash provided by operations under the indirect method.

A. True
B. False

Answer 1

Answer: A. True

Explanation: In creating a statement of cashflow, the direct or Indirect method may be employed. The Indirect method simply starts from the net income or loss by making necessary adjustment to the net income before arivubg at cash made from operating activities. Hence, Indirect methods starts calculation from the net income. This is the opposite in direct method whereby cash inflows and outflows from operating activities are used to arrive at the net income or cashflow.