You are part of a group of students analyzing a company’s financial statements for a class project. At a team meeting, one of your group members makes the following statement:
“After reviewing the statement of cash flows, I am certain there are some mistakes. In the section for cash flows from operating activities, the gain on the sale of equipment was taken away. This cannot be correct as the company received cash from the sale. Also, the company’s annual report indicates that dividends were declared at the end of the year, but there is nothing in the cash flows from financing activities related to them, which must be another error.”

Required

Identify where your classmate’s analysis is flawed and explain why this is the case.