XYZ Company’s only transaction in 20X1 was the sale of a fixed asset for $20,000 cash. The only line item on the income statement was “Gain on sale of fixed assets, $5,000.” Correct the following statement of cash flows, assuming the company uses the indirect method for reporting cash flows from operating activities. How would your answer change if the company uses the direct method?
Cash flows from operating activities
Gain on sale of fixed assets ......... $ 5,000
Cash flows from investing activities
Proceeds from sale of
fixed assets ............... 20,000
Total increase in cash ........... $25,000