Part 1Cash received from the sale of a building is reported on a statement of cash flows under Part 1
A. investing activities. B. operating activities. C. financing activities. D. noncash investing and financing activities.

Question

BlackTom AI · Accepted Answer

Sale of a building is a disposal of a long-term tangible asset, so the cash received is classified as an investing activity on the statement of cash flows.

1. Relevant knowledge points and concepts
- The statement of cash flows has three primary sections: operating activities (day-to-day revenue and expense cash flows), investing activities (cash flows from acquisition and disposal of long-term assets and investments), and financing activities (cash flows from debt and equity transactions). Noncash investing and financing activities are disclosed separately because they do not involve cash receipts or payments.
- Sale of property, plant, and equipment (PPE) is a disposal of a long-term asset and therefore an investing cash flow. Any gain or loss on the sale affects net income but is adjusted in the operating section when using the indirect method.

2. Step-by-step reasoning
- Identify the transaction: cash received from selling a building = proceeds from disposal of PPE.
- Classify the type of cash flow: proceeds from disposal of long-term assets = investing activity.
- Presentation nuance: under either direct or indirect method, the cash inflow itself is shown in the investing section. If the indirect method is used, the gain or loss on disposal is removed from net income in the operating section because the gain/loss is noncash relative to operating performance.

3. Calculations / intermediate steps
- No numerical calculation is necessary. Conceptually: Cash proceeds (investing inflow) + removal of asset book value (non-cash accounting change) = effect on cash and equity; any difference is recorded as gain/loss in income and adjusted in operating section (indirect method).

4. Why the correct answer is correct
- The building is a long-term asset; selling it converts an investing asset to cash. Accounting frameworks (GAAP, IFRS) explicitly place such proceeds in investing activities.

5. Why other options are incorrect
- B (operating): Operating cash flows concern core business revenues/expenses, not disposal of fixed assets. C (financing): Financing relates to borrowing, repaying debt, issuing stock, or paying dividends—not selling assets. D (noncash investing and financing): Noncash items are exchanges without cash (e.g., issuing stock to acquire an asset); here cash was received.

6. Conclusion
- Therefore, the cash received from the sale of a building is reported under investing activities. This confirms answer A.

Part 1Cash received from the sale of a building is reported on a statement of cash flows under Part 1 A. investing activities. B. operating activities. C. financing activities. D. noncash investing and financing activities.Single choice

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