WD Company reports profit in 2012 of $1,300 million and depreciation expense of $851 million.They also report investment in new theme parks,resorts,and other property of $2,134 million for 2012.Which of the following disclosures would appear on their statement of cash flows?
A)Depreciation of $851 million would be deducted from profit under operating activities and the $2,134 million would be added under investing activities
B)Depreciation of $851 million would be added to profit under operating activities and the $2,134 million would be added under investing activities
C)Depreciation of $851 million would be added to profit under operating activities and the $2,134 million would be deducted under investing activities
D)Depreciation of $851 million would be deducted from profit under operating activities and the $2,134 million would be deducted under investing activities

Question

Quizplus · Accepted Answer

Depreciation is added to profit under operating activities since it is a non-cash expense, and the investment in new theme parks and resorts is deducted from cash flows under investing activities since it is an outflow of cash. Therefore, option C is the correct answer.

WD Company Reports Profit in 2012 of $1,300 Million and Depreciation