For a firm using the indirect method,which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities?
A)An increase in wages payable will be added to net income.
B)A decrease in accrued interest payable will be deducted from net income.
C)Amortization of bond discount will be added to net income.
D)Patent amortization expense will be deducted from net income.

Question

Quizplus · Accepted Answer

Patent amortization expense is a non-cash expense that has already reduced net income. When using the indirect method to calculate cash flows from operating activities, non-cash expenses like patent amortization are added back to net income, not deducted.

For a Firm Using the Indirect Method,which of the Following