DEPRECIATIONG AND CFO - Question...

  1. An analyst gathered the following information about three equipment sales that a company made at the end of the year: First Column - ORIGINAL COST Second - Acc Dep at date of Sale Third Sale Proceeds Original Accu Dep Sale Cost at Date of Sale Proceeds $200,000 $150,000 $70,000 2$200,000 $200,000 $30,000 3$300,000 $250,000 $40,000 All else equal for that year, the company’s cash flow from operations will most likely be: A. $40,000 less than net income. B. $10,000 less than net income. C. $10,000 more than net income. D. $40,000 more than net income.

C

Can you show me the calculation??

Is C the answer? 1. $200,000 - $150,000 = $50,000 and sold at $70,000 => Net + $20,000 2. $200,000 - $200,000 = $0 and sold at $30,000 => Net +$30,000 3. $300,000 - $250,000 = $50,000 and sold at $40,000 => Net -$10,000 Net effect is 20,000 + 30,000 - 10,000 = 40,000 profit

40,000 profit so it needs to be deducted during the CFO calculation !!! So A)

40k is the net gain from sale of assets, CFO = NI - gain from sale of assets =X - 40k so A would be my answer.

Thanks… “A” is the Answer.