A.
Statement of
Cash flows from operating activities: These are the cash produced by the normal business operations.
Indirect method: Under this method, the following amounts are to be adjusted from the Net Incometo calculate the net cash provided from operating activities.
Cash flows from operating activities (Indirect method) |
Add: Decrease in current assets |
Increase in current liability |
|
Loss on sale of plant assets |
Deduct: Increase in current assets |
Decrease in current liabilities |
Gain on sale of plant assets |
Net cash provided from or used by operating activities |
The below table shows the way of calculation of cash flows from operating activities:
To Determine: The amount of gain or loss on the sale.
B.
The effect of the transaction on cash flows.
C.
The reporting of the transactions on the statement of cash flows under indirect method.
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