Practice prompt · Q:long-lived-asset-estimates-and-exits/disposal-cash-flow-001

Trace an asset sale through cash flow and income

Formative articulation item on gross investing proceeds and the indirect method treatment of a disposal gain.

Updated Sep 10, 2026 Review due Nov 6, 2026

Practice

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Using the Beacon vehicle sale, which statement-of-cash-flows treatment preserves the distinction between cash proceeds and the gain included in net income?

Choose the best answer. A Report the $18,000 cash receipt as an investing inflow and subtract the $3,000 gain included in net income in the indirect operating reconciliation. B Report only the $3,000 gain as an investing inflow because carrying amount is a noncash number. C Report $18,000 operating inflow and subtract $18,000 from net income because the entire sale is nonrecurring. D Report both $18,000 investing inflow and $3,000 operating inflow because proceeds and gain are two benefits from the sale.

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Answer: A

The $18,000 receipt is the investing cash inflow under the bounded facts. Net income includes the $3,000 gain, so the indirect operating reconciliation subtracts that gain. Choice A preserves one cash receipt and one residual income effect without double counting.