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CMA Intermediate · Financial Management and Business Data Analytics · Cash Flow Statement - Preparation and Analysis

Under AS 3 (Cash Flow Statements) as applied to a non-financial company, in which section of the cash flow statement would the cash proceeds from the sale of an old plant be reported?

The proceeds from selling an old plant are reported under investing activities, because investing activities cover the acquisition and disposal of long-term assets and investments. The sale is not part of the firm's main revenue-producing activity, and it involves actual cash, so it is not a non-cash item.

  1. AOperating activities
  2. BInvesting activitiesCorrect
  3. CFinancing activities
  4. DDisclosed only as a non-cash item

Explanation

Sale of a fixed asset such as plant is a disposal of a long-term asset. Cash flows from acquiring or disposing of long-term assets are investing activities. It is not part of the principal revenue-producing activity, so it is not operating.

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