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On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be: Group of answer choices added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends. added to net income in converting the net income reported on the income statement to cash flows from operating activities. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities. deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends.

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Answer: deducted from net income in converting the net income reported on the income statement to cash flows from operating activities.

Explanation:

Cashflows relating to investments that a company has should go to the Investing section of the cashflow statement. This includes proceeds from their sale.

The gain on sales however, is included in the calculation of net income and net income goes to the operating section of the cashflow statement. When putting the total sales proceeds for the asset in the investing section therefore, the gain must be subtracted from the net income in order to avoid double counting as it is already included in the full sales proceeds going to the Investing section.

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