Which item is a noncash item that would be added to net income to convert it to cash flow from operating activities?
A)Accounts receivable.
B)Depreciation.
C)Accounts payable.
D)Inventory.
Use the indirect method to answer questions 7-10.The following information is available for Armstrong Company:
$$\begin{array} { l r l r }
\text { Net income } & \$ 450 & \text { Increase in plant and equip. } & \$ 170 \
\text { Depreciation expense } & 80 & \text { Payment of dividends } & 10 \
\text { Decrease in accts. receiv. } & 20 & \text { Increase in long-term debt } & 100 \
\text { Increase in inventories } & 15 & \text { Decrease in accounts payable } & 30
\end{array}$$

Question

Which item is a noncash item that would be added to net income to convert it to cash flow from operating activities?
A)Accounts receivable.
B)Depreciation.
C)Accounts payable.
D)Inventory.
Use the indirect method to answer questions 7-10.The following information is available for Armstrong Company:
$$\begin{array} { l r l r } 
\text { Net income } & \$ 450 & \text { Increase in plant and equip. } & \$ 170 \
\text { Depreciation expense } & 80 & \text { Payment of dividends } & 10 \
\text { Decrease in accts. receiv. } & 20 & \text { Increase in long-term debt } & 100 \
\text { Increase in inventories } & 15 & \text { Decrease in accounts payable } & 30
\end{array}$$

Quizplus · Accepted Answer

Depreciation is a noncash expense that is added back to net income when using the indirect method to calculate cash flow from operating activities, as it reduces net income but does not involve an actual cash outflow.

Which Item Is a Noncash Item That Would Be Added