# 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.