Which of the Following Statements Is False

question 177

Multiple Choice

Which of the following statements is false?

• A) Depreciation expense is added to profit in the operating activities section of the statement of cash flows because it had no cash effect on profit under the indirect method.
• B) Depreciation expense is included in the investing activities section of the cash flow statement.
• C) The only cash effect for depreciation is the tax savings provided by its deduction to derive taxable income.
• D) Depreciation is a non-cash expense that reduces profit but involves no outflow of cash.

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Definitions:

Future Lease Payments

The amounts due over the lease term for the use of an asset.

Salvage Value

The estimated value that an asset will realize upon its sale at the end of its useful life.

Captive Finance Company

A subsidiary whose primary purpose is to provide financing to customers buying the parent company's product, facilitating purchases and increasing sales.

Direct Leasing

A lease arrangement where the lessor purchases the asset and rents it directly to the lessee without involving intermediaries.