Lincoln Restaurants reported net income in 2014 of $45.9 million and depreciation expense of $48.8 million. It also reported additions to property and equipment of $162.9 million. Which of the following disclosures would appear on the 2014 statement of cash flows?

Question

Quizplus · Accepted Answer

Depreciation is added back to net income under operating activities in the statement of cash flows because it is a non-cash expense. The additions to property and equipment are considered investing activities and therefore would be deducted from cash flows from operating activities. So, depreciation of $48.8 million would be added to net income under operating activities and the $162.9 million would be deducted under investing activities, resulting in a net decrease of $114.0 million ($48.8 million - $162.9 million).

Lincoln Restaurants Reported Net Income in 2014 of $45