Which of the following would be an addition to net income when using the indirect method to derive net cash flows from operating activities?
A) Payment of cash dividends
B) Decrease in accounts payable
C) Increase in merchandise inventory
D) Loss on sale of machinery and equipment

Question

Quizplus · Accepted Answer

Loss on sale of machinery and equipment would be added back to net income in the indirect method because it is a non-cash expense that reduced net income on the income statement, but did not involve an outflow of cash in the operating activities.

Which of the Following Would Be an Addition to Net