Ace Industries prepares its statement of cash flows using the direct method. Ace sold equipment with a book value of $6,400.00 at a loss of $800.00. The amount to be reported on the statement of cash flows under operating activities is A. $0.00. B. $800.00.

Question

Ariana Herrera

Business

8 June, 08:54

Ace Industries prepares its statement of cash flows using the direct method. Ace sold equipment with a book value of $6,400.00 at a loss of $800.00. The amount to be reported on the statement of cash flows under operating activities is A. $0.00. B. $800.00.

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Answers (1)

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Diya · Answer 1

Option B,$800 is correct

Explanation:

The operating activities need to be adjusted for loss made on sale of equipment which is not a cash flow in actual sense by adding back the loss to the net income and showing the cash received from the disposal as an inflow under investing activities.

As a result, the correct option is B,$800, which should be added back to net income in order to show the impact of non-cash items in the statement of cash flows Ace industries