In preparing a statement of cash flows using the indirect method,the Depreciation Expense ________.
A) is added back as an adjustment to Net Income in the operating activities section
B) is shown as a negative cash flow in the investing activities section
C) is added back to Purchases of Plant Assets under investing activities
D) is shown as a negative cash flow under operating activities

Question

Quizplus · Accepted Answer

Depreciation expense is a non-cash expense that reduces net income. In the statement of cash flows, it is added back to net income in the operating activities section because depreciation does not involve a cash outflow. Therefore, choice A is the correct option.

In Preparing a Statement of Cash Flows Using the Indirect