CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows I
A company sells a building it owned at a gain over carrying amount. In the statement of cash flows, the cash proceeds from the sale are most likely reported in:
The full cash proceeds from selling a building are an investing inflow. The gain is included in net income, so under the indirect method it is subtracted in operating activities to avoid counting it twice. The sale is not an operating or financing activity.
- Ainvesting activities, as the full proceeds receivedCorrect
- Boperating activities, because the gain is in net income
- Cfinancing activities, as a reduction of long-term assets
Explanation
Proceeds from selling long-term assets are investing inflows at the full cash amount. The gain is deducted from net income in the operating section under the indirect method to avoid double counting. Reporting only the gain in operating activities would be wrong.
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