Illinois Woodworking Company is preparing its statement of cash flows using the indirect method. During theyear, Illinois Woodworking sold equipment for

$7,990

cash. The net book value of the asset was

$4,770.

Which of the following statements istrue?

1 The cash receipt of $7,990 is shown as a positive cash flow in the investing activities section.

2 The book value of the asset sold is shown as a negative cash flow in the investing activities section.

3 The gain on sale of $3,220 is added back to net income in the operating activities section.

4 The gain on sale of $3,220 is shown as a positive cash flow in the financing activities section.