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12 March, 20:49

In a statement of cash flows, if used equipment is sold at a loss, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment:

A. With no addition or subtraction

B. Less the loss

C. (doesn't matter)

D. (doesn't matter)

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Answers (1)
  1. 13 March, 00:41
    0
    (B) less the loss

    Explanation:

    The statement of cash flows records the cash element of transactions irrespective of their nature, be it operational, investing or financing.

    Thus when an asset is sold at a loss, the cash received from the sale of the asset is recorded in the statement of cash flow.

    The cash received = carrying amount less the loss on the sale.

    Other elements of the sale will be recorded as follows:

    Loss on sale will be recognized in the profit/loss account The carrying amount will be deducted from total equipment in the statement of financial position The accumulated depreciation related to the equipment will also be deducted from total accumulated depreciation of all equipment.
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