When converting net income to net cash in the operating activities section of the statement of cash flows, which of the following is NOT added to net income?
A) Gain on sale of land
B) Decrease in inventory
C) Decrease in accounts receivable
D) Depreciation expense

Question

Quizplus · Accepted Answer

When converting net income to net cash in the operating activities section of the statement of cash flows, gains on sale of assets are subtracted from net income as they represent a non-operating activity. Therefore, A) Gain on sale of land is NOT added to net income. Decreases in inventory and accounts receivable are added to net income, as they represent an increase in cash, while depreciation expense is added back as a non-cash expense.

When Converting Net Income to Net Cash in the Operating