Which of the following would require an adjustment in the computation of cash flow from operations using the indirect method?

I. Depreciation expense
II. Loss on sale of asset
III. Sale of services to customers for cash
IV. Utility bill received and paid in cash

A)I
B)I and II
C)I and III
D)IV

Question

Which of the following would require an adjustment in the computation of cash flow from operations using the indirect method?

I. Depreciation expense
II. Loss on sale of asset
III. Sale of services to customers for cash
IV. Utility bill received and paid in cash

A)I
B)I and II
C)I and III
D)IV

Quizplus · Accepted Answer

Both depreciation expense and loss on sale of asset require adjustments in the computation of cash flow from operations using the indirect method. Depreciation expense is a non-cash expense that gets added back to net income, while the loss on sale of asset is subtracted from net income. The sale of services to customers for cash would be included in the computation of cash flow from operations, and the utility bill received and paid in cash would be recorded as a cash outflow in the operating activities section of the statement of cash flows.

Which of the Following Would Require an Adjustment in the Computation