Which of the following is an addition to net income when the indirect method is used?
A) an increase in inventory
B) a loss on sale of equipment
C) a decrease in accounts payable
D) an increase in accounts receivable

Question

Quizplus · Accepted Answer

A loss on the sale of equipment is added back to net income in the indirect method because it is a non-cash expense that reduced net income on the income statement. The indirect method starts with net income and adjusts for changes in balance sheet accounts to convert the income statement from an accrual basis to a cash basis.

Which of the Following Is an Addition to Net Income