In Calculating Net Cash from Operating Activities Using the Indirect

question 154

Multiple Choice

In calculating net cash from operating activities using the indirect method, depreciation expense is

• A) deducted from net income.
• B) added to net income.
• C) ignored because it does not affect income.
• D) ignored because it is included in the investing section.

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Definitions:

Adjusting Journal Entries

Journal entries made at the end of an accounting period to update certain accounts and ensure they accurately reflect the financial status of the business.

Double-Declining-Balance

A method of accelerated depreciation that doubles the regular depreciation rate, reducing the value of an asset more quickly in its earlier years.

Salvage Value

The projected remaining worth of an asset upon the conclusion of its operational lifespan, frequently accounted for in determining depreciation.

Depreciation Expense

An accounting method allocating the cost of a tangible asset over its useful life.