Even Though Depreciation, Depletion and Amortization Are Expenses, They Are

question 45

True/False

Even though depreciation, depletion and amortization are expenses, they are considered non-cash transactions and must be subtracted from net income in the operating activities section of an indirect method cash flow statement.

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Definitions:

Straight-Line Depreciation

A procedure for spreading out the cost of a solid asset over the duration of its usability in equal annual payments.

Obsolescence

The process or condition of a product or component becoming outdated or no longer useful due to advancements or changes in technology, market demand, or other factors.

Salvage Value

The anticipated recovery value of an asset after its period of usefulness ends.

Trade-In Allowance

The value that a dealer offers to a customer for the customer's used item (e.g., car) when purchasing a new item.