Treasury stock costing $89,050 was sold for $94,375 cash.Which of the following statements accurately describes the reporting of this transaction within the cash flow statement assuming that the indirect method is used to determine net cash flows from operating activities?

A) A gain of $5,325 is deducted from net income and a $94,375 cash inflow is reported within the investing activities section of the cash flow statement.
B) A gain of $5,325 is deducted from net income and a $94,375 cash inflow is reported within the financing activities section of the cash flow statement.
C) There is no adjustment necessary to net income but a $94,375 cash inflow is reported within the financing activities section of the cash flow statement.
D) There is no adjustment necessary to net income but a $94,375 cash inflow is reported within the investing activities section of the cash flow statement.

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Karan Gupta · Accepted Answer

Final Answer : C, Explanation :  C) is correct because the sale of treasury stock is a financing activity, and the cash inflow from the sale is reported in the financing activities section of the cash flow statement. There is no adjustment to net income because treasury stock transactions do not affect net income.

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