An increase in the plant and equipment account of $100,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as:
A) an addition to net income of $100,000 in order to arrive at net cash provided by operating activities.
B) a deduction from net income of $100,000 in order to arrive at net cash provided by operating activities.
C) an addition of $100,000 under investing activities.
D) a deduction of $100,000 under investing activities.

Question

Quizplus · Accepted Answer

An increase in the plant and equipment account signifies an investment in assets, which falls under the category of investing activities. Therefore, it will be deducted from net income under the indirect method in order to calculate net cash provided by operating activities.

An Increase in the Plant and Equipment Account of $100,000