A company uses the indirect method to prepare the statement of cash flows. How can amortization be presented on the statement of cash flows?
A)Amortization expense can be added to net income in the financing activities section on the statement of cash flows.
B)Amortization expense can be subtracted from net income in the operating section on the statement of cash flows.
C)Amortization expense can be added to net income in the operating activities section on the statement of cash flows.
D)Amortization expense can be added to net income in the investing activities section on the statement of cash flows.

Question

Quizplus · Accepted Answer

Amortization expense is a non-cash expense. In the indirect method of preparing the statement of cash flows, non-cash expenses are added back to net income in the operating activities section to adjust for the cash flow impact of these non-cash transactions.

A Company Uses the Indirect Method to Prepare the Statement