QuestionAugust 8, 2025

Fill In the Blank Question A gain from the sale of equipment would be (added/subtracted) square to (from) net income when computing cash flows from using the indirect method. C Need help? Review these concept resources. (1) Read About the Concept

Fill In the Blank Question A gain from the sale of equipment would be (added/subtracted) square to (from) net income when computing cash flows from using the indirect method. C Need help? Review these concept resources. (1) Read About the Concept
Fill In the Blank Question
A gain from the sale of equipment would be (added/subtracted) square  to (from) net income when computing cash flows from
using the indirect method.
C Need help? Review these concept resources.
(1) Read About the Concept

Solution
4.3(247 votes)

Answer

Subtracted Explanation 1. Identify the Treatment of Gains in Cash Flow When using the indirect method of preparing the statement of cash flows, gains from the sale of equipment are considered non-cash activities affecting net income. Such gains need adjustment to reconcile net income to net cash flows. 2. Determine Adjustment Needed Since the gain is already included in net income but doesn’t contribute to cash flows from operating activities, it should be subtracted from net income when computing cash flows from operating activities.

Explanation

1. Identify the Treatment of Gains in Cash Flow<br /> When using the indirect method of preparing the statement of cash flows, gains from the sale of equipment are considered non-cash activities affecting net income. Such gains need adjustment to reconcile net income to net cash flows.<br /><br />2. Determine Adjustment Needed<br /> Since the gain is already included in net income but doesn’t contribute to cash flows from operating activities, it should be subtracted from net income when computing cash flows from operating activities.<br /><br />
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