Reliance Corporation has provided the following information for the year ended December 31, 2019: The equipment account balance increased $202,000.
The equipment accumulated depreciation account balance increased $35,200.
Equipment costing $50,400 was sold during the year resulting in a $10,300 gain.
Depreciation expense recorded on the equipment during the year was $65,200.
Which of the following statements is correct with respect to determining cash flow from operating activities?
A. A $258,400 cash outflow is reported for equipment purchases.
B. A $62,450 cash inflow is reported from the equipment sale.
C. A $207,000 cash outflow is reported for equipment purchases.
D. A $51,400 cash outflow is reported for the equipment sale.

Reliance Corporation

The cash flow from operating activities related to the equipment account is $54,900.

This involves the adjustment of the net income with the depreciation expense for the year ($65,200) and the gain from the sale of the equipment (-$10,300).

Therefore, none of the answers from A to D is correct.  The cash outflow for equipment purchases is not an operating activity.  The cash inflow from equipment sale is not an operating activity.

Explanation:

a) Data and Calculations:

Increase in equipment account balance = $202,000

Increase in equipment accumulated depreciation account balance = $35,200

Depreciation expense on equipment during the year = $65,200

Accumulated depreciation on equipment sold = $30,000 ($65,200 - $35,200)

Cost of equipment sold = $50,400

Book value of equipment sold = $15,200 ($50,400 - $35,200)

Depreciation expense =                    $65,200

Gain from the sale of equipment =     (10,300)

Cash flow from operating activities $54,900

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