Pull & Co. reported net income for the current year. Which of the following business transactions would cause cash from operating activities to be higher than the amount of net income?
A) Cash dividends were paid to stockholders during the year.
B) Depreciation expense was recorded for the year.
C) A bank loan was repaid during the year.
D) Equipment was purchased for cash during the year.

Question

Quizplus · Accepted Answer

Depreciation expense is a non-cash expense that is added back to net income to calculate cash from operating activities. Therefore, if the company recorded a significant amount of depreciation, cash from operating activities could be higher than net income. The other transactions listed would result in a decrease in cash from operating activities.

Pull & Co Reported Net Income for the Current Year