Which of the following would be added to net income using the indirect method?
A) loss on sale of equipment
B) gain on sale of a long-term investment
C) an increase in accounts receivable
D) proceeds from the sale of a patent

Question

Quizplus · Accepted Answer

The loss on sale of equipment would be added back to net income using the indirect method because it represents a non-cash expense that has reduced net income for the period.

Answer: C
 An increase in accounts receivable would be added back to net income using the indirect method because it represents revenue that has been earned but not yet collected, which does not represent an actual increase in cash flows for the period.

Note: B and D would not be added to net income using the indirect method, as they represent gains from the sale of assets or investments, which do represent an actual increase in cash flows for the period.

Which of the Following Would Be Added to Net Income