At the beginning of 2009, Baldwin Corporation bought an automobile for $36,000 by issuing a note payable. The automobile has a six-year life and is depreciated using the straight-line method. To determine net cash flow from operating activities for 2009 using the indirect method, net income should be:

Question

Quizplus · Accepted Answer

The depreciation expense of $6,000 is a non-cash charge that reduces net income. When using the indirect method to calculate net cash flow from operating activities, net income should be increased by the depreciation expense to adjust for this non-cash item.

At the Beginning of 2009, Baldwin Corporation Bought an Automobile