WD Company reports profit in 2013 of $1,300 million and depreciation expense of $851 million. They also report investment in new theme parks, resorts, and other property of $2,134 million for 2013. Which of the following disclosures would appear on their statement of cash flows?
A) Depreciation of $851 million would be deducted from profit under operating activities and the $2,134 million would be deducted under investing activities.
B) Depreciation of $851 million would be added to profit under operating activities and the $2,134 million would be added under investing activities.
C) Depreciation of $851 million would be deducted from profit under operating activities and the $2,134 million would be added under investing activities.
D) Depreciation of $851 million would be added to profit under operating activities and the $2,134 million would be deducted under investing activities.

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense, so it is added back to profit in the operating activities section. Investment in new property is a cash outflow, so it is deducted in the investing activities section.

WD Company Reports Profit in 2013 of $1,300 Million and Depreciation