When reporting operating activities by the indirect method in a statement of cash flows:
A) increases in operating assets are added back to net income.
B) increases in operating liabilities are subtracted from net income.
C) gains are added back to net income.
D) amortization is added back to net income.

Question

Quizplus · Accepted Answer

Amortization is a non-cash expense that reduces net income on the income statement but does not affect cash flow; therefore, it is added back to net income in the cash flow statement when using the indirect method.

When Reporting Operating Activities by the Indirect Method in a Statement