91Ó°ÊÓ

All the activities that are concerned with daily business operations are known as operating activities. It includes activities such as sales, production, and purchases.

1. The loss on the sale of plant assets of $2,300 will be added to the cash flow from the operating section.

2. The sale of the plant for $4,000 will be added to the cash flow from investing activities.

Working note:

$$\begin{gathered} Lossonsale=Salesprice-\left(Purchaseprice-Accumulateddepreciation\right) \\ =\$4,000-\left(\$18,000-\left(\frac{\$18,000}{10}×6.5\right)\right) \\ =\$4,000-\$6,300 \\ =(\$2,300) \end{gathered}$$

(b) Issue of common stock will be added to the cash flow from financing activities.

1. Writing of uncollectible accounts against the allowance account does not affect the cash position and therefore it will not be reported in the statement of cash flow.
2. Net loss will be reported in the cash flow from operations. Depreciation will be added to the cash flow from operation because it is a non-cash expense. The gain realized on available for sale securities will be deducted from the cash flow from operations.