How do firms reclassify gains and losses on the disposal of property. plant, and equipment? Why is this reclassification appropriate? A. Under the indirect method, gains or losses are reclassified on the disposal of property, plant and equipment by removing them from the operating activities section and reporting the cash received on the sale in the investing activities section. This reclassification is appropriate for several reasons. First, the sale of these assets clearly is not part of normal operations. Second, the gain does not provide cash and the loss does not use cash. Only the cash received on a sale of property, plant and equipment represents an investing cash inflow. B. Under the direct method, we reclassify gains or losses on the disposal of property, plant and equipment by removing them from the investing activities section and reporting the cash received on the sale in the operating activities section. This reclassification is appropriate for several reasons. First, the sale of these assets clearly is a part of normal operations. Second, the gain provides cash and the loss uses cash. Hence, cash received on the sale of property, plant and equipment represents an operating cash inflow. C. Under the direct method, we reclassify gains or losses on the disposal of property, plant and equipment by removing them from the operating activities section and reporting the cash received on the sale in the investing activities section. This reclassification is appropriate for several reasons. First, the sale of these assets clearly is not part of normal operations. Second, the gain does not provide cash and the loss does not use cash. Only the cash received on a sale of property, plant and equipment represents an investing cash inflow. D. Under the indirect method, we reclassify gains or losses on the disposal of property, plant and equipment by removing them from the investing activities section and reporting the cash received on the sale in the operating activities section. This reclassification is appropriate for several reasons. First, the sale of these assets clearly is a part of normal operations. Second, the gain provides cash and the loss uses cash. Hence, cash received on the sale of property, plant and equipment represents an operating cash inflow. How do financial statement analysts use earnings per share information? A. Every quarter, the current quarter's earnings per share is compared to analysts' estimates and if expectations are exceeded, there is a negative impact on share prices. B. Analysts calculate earnings per share on an annual basis in order to determine bonus plans or other compensation that is based on net income and/or stock price. C. Analysts calculate earnings per share on an annual basis in order to determine their equity claim per share in the company. D. Every quarter, the current quarter's earnings per share is compared to analysts' estimates and if expectations are exceeded, there is a positive impact on share prices. A. There are two acceptable formats for the statement of cash flows - the cash method and the accrual method. The only difference between the two formats is the method used to calculate cash flows from investing activities. Net cash flows from investing activities will be the same under either method. B. There are two acceptable formats for the statement of cash flows - the indirect method and the direct method. The only difference between the two formats is the method used to calculate cash flows from operating activities. Net cash flows from operating activities will be the same under either method. C. There are two acceptable formats for the statement of cash flows - the indirect method and the direct method. The only difference between the two formats is the method used to calculate cash flows from investing activities. Net cash flows from investing activities will be the same under either method. D. There are two acceptable formats for the statement of cash flows - the cash method and the accrual method. The only difference between the two formats is the method used to calculate cash flows from operating activities. Net cash flows from operating activities will be the same under either method. Does the accounting equation explain the change in cash during the period? A. While the statement of cash flows does explain the change in cash during the period, it cannot be related to the accounting equation due to the exclusion of noncash items from the statement of cash flows. Therefore, the accounting equation would be incomplete without the inclusion of such items. B. The change in cash can be explained by examining the changes in all the balance sheet accounts. If we disaggregate each element of the balance sheet equation into its main components, we can restate the balance sheet equation as showing that the change in cash equals the changes in other assets, liabilities and equity accounts. C. The change in cash can be explained by examining the changes in the other assets and liabilities accounts. If we disaggregate the other assets and liabilities accounts in the balance sheet equation, we can restate the balance sheet equation as showing that the change in cash equals the changes in other assets and liabilities accounts. D. The change in cash can be explained by examining not only the changes in all the balance sheet accounts, but the changes in the income statement accounts as well. If we disaggregate each element of the balance sheet and income statement accounts into their main components, we can restate the balance sheet equation as showing that the change in cash equals the changes in other assets, liabilities, equity, income, and expense accounts