Answered

IDNLearn.com provides a collaborative environment for finding and sharing knowledge. Receive prompt and accurate responses to your questions from our community of knowledgeable professionals ready to assist you at any time.

Gannon Corporation uses the indirect method to prepare its statement of cash flows. Following this approach, a gain on sale of equipment was deducted from net income in computing net cash flow from operating activities. The most likely reason for this adjustment is that:

Sagot :

Ayfat23idn

Answer:

This type of transaction is not classified as an operating activity.

Explanation:

From the question we are informed about Gannon Corporation who uses the indirect method to prepare its statement of cash flows. Following this approach, a gain on sale of equipment was deducted from net income in computing net cash flow from operating activities. In this case, The most likely reason for this adjustment is that this type of transaction is not classified as an operating activity.

The indirect method produces

statement of cash flows by starting with net income/loss, along with making subsequent additions/deductions of values solely from amount for non-cash revenue as well as expense items which result to cash flow from operating activities. Operating activities can be regarded as daily activities of a particular company that brings about production and selling their products, as well as generating revenues, and

general administrative with maintenance activities.

Thank you for using this platform to share and learn. Don't hesitate to keep asking and answering. We value every contribution you make. Find reliable answers at IDNLearn.com. Thanks for stopping by, and come back for more trustworthy solutions.