CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

True or False?

A transaction in which an asset that cost $45,000, had a book value of $4,000, and was sold for $3,000 would appear on the statement of cash flows as an investing activity of $4,000.
Correct Answer: False

The investing activity is the amount of cash flows from the transaction. In this case, the net cash inflow was $3,000.

User Contributed Comments 3

User Comment
johntan1979 If the questions stated that the asset was purchased for $45,000, then the answer is $42,000 net cash outflow.
johntan1979 Loss on sale = book value - amount sold = $1,000

This is ADDED back to net income under indirect method.

Depreciated value = cost - book = $41,000

This is ADDED to depreciation expense, which is then ADDED back to net income.
fredpat01 Thank you Johntan1979!
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