When preparing the statement of cash flows using the indirect method,which statement is INCORRECT?
A)Gains on the sale of long-term assets are subtracted from net income.
B)Losses on the sale of long-term assets are subtracted from net income.
C)Depreciation expense is added to net income.
D)Increases in current liabilities are added to net income.

Question

Quizplus · Accepted Answer

The incorrect statement is that losses on the sale of long-term assets are subtracted from net income. In fact, losses on the sale of long-term assets are added back to net income in the indirect method of preparing the statement of cash flows because they are non-cash expenses that reduced net income on the income statement.

When Preparing the Statement of Cash Flows Using the Indirect