Use the information below to answer the following question(s):Howard Co. uses the direct method to prepare its operating activities section of the statement of cash flows. Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate no effect on net income. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate no effect on cash flows.Howard Co. sold equipment with a book value of $20,000 for $17,000 cash.
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What will be an ideal response?
(D) (NA) (I) (NA)
Loss on sale = Proceeds of $17,000 ? Book value of $20,000 = $3,000
The $17,000 cash received from the sale of equipment is reported as a cash inflow in the investing activities section of the statement of cash flows. The $3,000 loss on the sale reduces net income, but does not affect cash flows for operating activities.
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What will be an ideal response?
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