When using the indirect method to complete the cash flows from operating activities section of the statement of cash flows,what is the proper disposition of depreciation expense?
A)Subtract depreciation from net income.
B)Add depreciation to net income.
C)Disregard depreciation because it relates to an investing activity.
D)Disregard depreciation because it is a noncash expense.

Question

Quizplus · Accepted Answer

Because depreciation expense reduces net income,but is a noncash expense,it is added back to net income to arrive at net cash flows from operating activities.

When Using the Indirect Method to Complete the Cash Flows