In preparing the statement of cash flows by the indirect method,which of the following is a correct statement of one of the general rules to convert net income to a cash-basis equivalent?
A) Losses on the sale of long term assets are subtracted from net income.
B) All non-cashnoncash expenses and losses are subtracted from net income.
C) Increases in current assets are subtracted from net income.
D) Decreases in current liabilities are added to net income.

Question

Quizplus · Accepted Answer

Net cash flow from operating activities = Net income +/- Adjustments to reconcile net income to net cash flow from operating activities
Net cash flow from operating activities = Net income - Increase in current assets + Decrease in current assets + Increase in current liabilities - Decrease in current liabilities + Depreciation expense - Gain on sale of equipment + Loss on sale of equipment

In Preparing the Statement of Cash Flows by the Indirect