Forecasted depreciation expense, commonly estimated as: [(Current year depreciation expense / Prior year PPE, net) x Current year PPE, net], is added back to net income in the cash flow from operating activities section of the Statement of Cash Flows.

Question

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Depreciation expense is a non-cash charge that reduces net income but does not affect cash flow; therefore, it is added back to net income in the operating activities section of the cash flow statement to adjust for the non-cash effect.

Forecasted Depreciation Expense, Commonly Estimated As: [(Current Year Depreciation Expense