In a statement of cash flows, if used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment:
a. Plus the gain.
b. With no addition or subtraction.
c. Plus the gain and less the amount of tax attributable to the gain.
d. Plus both the gain and the amount of tax attributable to the gain.
Explanation
Choice "a" is correct.In a statement of cash flows, if used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment plus the gain.
Choices "c" and "d" are incorrect. The amount of tax attributable to the gain remains as part of operating activities.
Choice "b" is incorrect. Gain must be added to the carrying amount to equal "cash proceeds from sale of equipment."
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