Im on the reading of understanding cash flow statements, a loss on sale of equipment it`s not a investing activity according to the book, where it is reported than?
The gain (loss) component is recognized in the operating activities and the proceeds component is recognized in the investing activities section.
Here is a good summary of the process:
I believe that the gain/loss is considered nonoperating. McDonald’s is not in the business of selling used french fry cooking machines.
You need to distinguish the amount of gain/loss from the amount of cash flow from the sale.
The amount of gain/loss – which compares the sale price to the book value – appears on the income statement. The cash flow from the sale appears on the cash flow statement, and is a cash inflow from investing.
I guess now it makes sense to the answer in the book.
“B is correct. The only two items that would affect the investing section are the
purchase of equipment and the proceeds from sale of equipment: (€200,000) +
€120,000 = (€80,000). The loss on sale of equipment and the equity in earnings
of affiliate affect net income but are not cash flows. The issuance of debt is a
financing cash flow.”
So the loss on the sale appears on the income statement, yeah that makes sense.
You’re quite welcome.
He was asking about the cash flow statement. I agree gain (loss) would be non-operating on the income statement.