ooo T-Mobile 71% 11:24 PM ilearn.sfsu.edu Time left 0:34:36 A building costing $

Question

ooo T-Mobile 71% 11:24 PM ilearn.sfsu.edu Time left 0:34:36 A building costing $550,000 with accumulated depreciation of $225,000 was sold for $275,000 cash. Which of the following statements is correct with respect to preparing the cash flow statement if the indirect method is being used? Select one a. $275,000 will be added to net income to determine cash flow from operating activities and $325,000 will be reported as a cash outflow in the investing activities section. b, $50,000 will be deducted from net income to determine cash flow from operating activities and $275,000 will be reported as a cash inflow in the investing activities section c. $50,000 will be added to net income to determine cash flow from operating activities and $275,000 will be reported as a caslh inflow in the investing activities section. d. $50,000 will be added to net income to determine cash flow from operating activities and $325,000 will be reported as a caslh outflow in the investing activities section

Explanation / Answer

In indirect method of cash flow preparation, cash flow changes are strictly and purely classified under operating, investing and financing activities. Purchase and sale of assets are investing activities. Profits made from selling should be deducted from net income to arrive at operating cash flows.

Hence, correct option is (B).

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