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7 May, 11:55

Assume a company sold a piece of equipment for $3,000. The original cost was $15,000 and the accumulated depreciation prior to the sale was $10,000. What amount, if any, would appear in the operating activities section of the statement of cash flows using the indirect method?

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  1. 7 May, 13:52
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    The amount of $2000 (loss on sale) would be added to the reported profit under the operating section of the statement of cash flow

    Explanation:

    With the sale of an asset, the reported profit would have been increased or decreased by the amount of gains or losses realized on the sale of the equipment

    Gain/loss on sale = sales value - Carrying amount

    Carrying amount = cost - accumulated deprecation

    = $15,000 - $10,000

    = $5,000

    Loss on depreciation = 3,000 - 5,000

    = ($2000)

    The amount of $2000 would be added to the reported profit under the operating section of the statement of cash flow
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