Why is depreciation added to net income in the Operating Activities category of the statement of cash flows when the indirect method is used?
a. Depreciation expense is a negative amount in the Investing Activities section and therefore is a positive amount in the Operating Activities section.
b. Depreciation provides cash and therefore must be added to net income.
c. Depreciation was deducted in arriving at net income on the accrual basis of accounting; however, it did not require the use of cash.
d. Depreciation reduced the book value of plant assets and, therefore, must be reported as an investing activity.
c
You might also like to view...
What is a possible risk involved with licensing?
What will be an ideal response?
The formula for the fixed overhead volume variance is
A) (AFOH - SFOR) x SH B) (AFOH - SFOR) x AH C) AFOH - BFOH D) (AFOH - SFOR) x SH E) none of these
Organizations that focus on both the technical side and the human side of business are practicing which theory?
a. Progressive-technical theory b. Likert’s management theory c. Chaos theory d. Sociotechnical theory
Which of the following best describes the requirements of a partnership?
A) An association of persons, owning property in order to make a profit B) An association of persons, owning property, sharing gross receipts C) An association of persons D) An association of persons, owning a business in order to make a profit E) Both B and C adequately describe a partnership