Each Year, White Mountain Enterprises (WME) Prepares a Reconciliation Schedule

Multiple Choice

Each year, White Mountain Enterprises (WME) prepares a reconciliation schedule that compares its income statement with its statement of cash flows on both the direct and indirect method bases. In its 2018 income statement, WME reported a $40,000 loss on the sale of equipment. In its reconciliation schedule, WME should:

A) Report a $40,000 cash outflow for the direct method.
B) Show a $40,000 positive adjustment to net income under the indirect method.
C) Show a $40,000 negative adjustment to net income under the indirect method.
D) None of these answer choices are correct.