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Cash Flow Statement - Indirect

A company sold some of its plant assets during 2007. The original cost of the plant assets was $750,000 and the accumulated depreciation at date of sale was $700,000. The proceeds from the sale of the plant assets were $105,000. The information concerning the sale of the plant assets should be shown on the company's statement of cash flows (indirect method) for the year ended December 31, 2008, as a(n):

a.subtraction from net income of $55,000 and a $55,000 increase in cash flows from financing activities.

b.addition to net income of $55,000 and a $105,000 decrease in cash flows from investing activities.

c.subtraction from net income of $55,000 and a $105,000 increase in cash flows from investing activities.

d.addition of $105,000 to net income.

e.none of the above

Solution Preview

A company sold some of its plant assets during 2007. The original cost of the plant assets was $750,000 and the accumulated depreciation at date of sale was $700,000. The proceeds from the sale of the plant assets were $105,000. The information concerning the sale of the plant assets should be shown on the company's statement of cash flows (indirect method) for the year ended December 31, 2008, as a(n):

Step 1
Find out the gain or loss on the sale of Asset by Sale -Book Value
=105000-(750000-700000)
=Gain of $55000

Step 2
Posting the necessary ...

Solution Summary

The solution computes the indirect cash flow statements. Additional net income that decreases in cash flow from investing activities are determined.

$2.19