QUESTION 7 When using the indirect method to prepare the statement of.pdf
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When using the indirect method to prepare the statement of cash flows, depreciation expense should be presented as an addition to net income. This is because depreciation is a non-cash item that has previously reduced net income and must be added back. Therefore, it is important to reflect this adjustment in the cash flow statement.
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QUESTION 7 When using the indirect method to prepare the statement of.pdf
- 1. QUESTION 7 When using the indirect method to prepare the statement of cash flows, depreciation expense should be presented as a(n): O addition to net income. o cash flow from financing activities cash flow from investing activities. O deduction from net income. O investing and financing activity not affecting cash. Solution A. addition to net income. Depreciation is added back in cash flow statement because it is a non-cash item, which had reduced the net income, and thus should be added back.