Use the information below to answer the following question(s):Howard Co. uses the direct method to prepare its operating activities section of the statement of cash flows. Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate no effect on net income. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate no effect on cash flows.At the beginning of the current year, Howard Co. paid cash to purchase equipment costing $80,000. There was $10,000 of depreciation expense recognized during the accounting period.
(Show the combined effects of these two events.)
What will be an ideal response?
(D) (NA) (D) (NA)
The purchase of equipment for cash is reported as a cash outflow in the investing activities section of the statement of cash flows. Depreciation expense decreases net income, but this noncash expense does not impact cash flows.
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