Question

Bach Company sold an asset with a book value of $59,000

for $120,000 cash. Which of the following is a TRUE statement?

A. Gain on sale equals $120,000 and Cash inflow equals $61,000.

B. Gain on sale equals $61,000 and Cash inflow equals $120,000.

C. Gain on sale equals $120,000 and Cash inflow equals $120,000.

D. Gain on sale equals $59,000 and Cash inflow equals $59,000.

Even though depreciation, depletion, and amortization are expenses, they are considered

non- cash transactions and must be subtracted from net income in the operating activities section of an indirect method cash flow statement.

True or False

Answer 1

1.answer B. Gain on sale equals $61,000 and Cash inflow equals $120,000.

Book value is 59000 its sold for 120000 so Gain is 61000 and we will get a cash flow of 120000

2.False

Even though depreciation, depletion, and amortization are expenses, they are considered

non- cash transactions and must be Added to net income in the operating activities section of an indirect method cash flow statement.

these are non cash expenses and it will be already substracted so we need to add back to get correct operating cash flow