The amortization of bond discount related to long-term debt should be presented in a statement of cash flows prepared using the indirect method as a(n)
A) addition to net income in the adjustments to reconcile net income to cash from operating activities.
B) deduction from net income in the adjustments to reconcile net income to cash from operating activities.
C) outflow of cash.
D) inflow and outflow of cash.

Question

Quizplus · Accepted Answer

The amortization of bond discount increases the amount of interest expense reported in the income statement, which reduces net income. However, this amortization is a non-cash expense. Therefore, in the statement of cash flows prepared using the indirect method, it is added back to net income in the adjustments section to reconcile net income to net cash provided by operating activities.

The Amortization of Bond Discount Related to Long-Term Debt Should