Which of the following items is added to net income to determine cash flows from operating activities when the indirect method is used to prepare the Operating Activities category of the statement of cash flows?
A)Accumulated depreciation
B)Cash from note payable related to truck acquired
C)Cost of plant assets acquired during the year
D)Depreciation expense

Question

Quizplus · Accepted Answer

Depreciation expense is added back to net income when using the indirect method to prepare the Operating Activities category of the statement of cash flows. This is because depreciation is a non-cash expense that was deducted from revenue to calculate net income, and adding it back helps to show the cash generated from operations. The other options listed do not need to be added back to net income for the purpose of preparing the statement of cash flows.

Which of the Following Items Is Added to Net Income