Atkins Corporation has provided the following information for the year ended December 31,2010:
The equipment account balance increased $200,000.
The equipment accumulated depreciation account increased $35,000.
Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
Depreciation expense on the equipment recorded during the year was $65,000.
Which of the following statements is correct with respect to cash flow from operating activities determination?
A)Using the indirect method, net income is increased by the $35,000 increase in accumulated depreciation.
B)Using the indirect method, net income is decreased by the $60,000 sales price of the equipment.
C)Using the indirect method, net income is increased by the $65,000 depreciation expense.
D)Using the indirect method, net income is increased by the $10,000 gain on the sale of the equipment.

Question

Atkins Corporation has provided the following information for the year ended December 31,2010:
The equipment account balance increased $200,000.
The equipment accumulated depreciation account increased $35,000.
 Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
 Depreciation expense on the equipment recorded during the year was $65,000.
Which of the following statements is correct with respect to cash flow from operating activities determination?
A)Using the indirect method, net income is increased by the $35,000 increase in accumulated depreciation.
B)Using the indirect method, net income is decreased by the $60,000 sales price of the equipment.
C)Using the indirect method, net income is increased by the $65,000 depreciation expense.
D)Using the indirect method, net income is increased by the $10,000 gain on the sale of the equipment.

Quizplus · Accepted Answer

Depreciation expense is added to net income when determining cash flow from operating activities under the indirect method.

Atkins Corporation Has Provided the Following Information for the Year