Why Do Accountants Add Depreciation Expense to Net Income When

question 49

Multiple Choice

Why do accountants add Depreciation Expense to net income when determining net cash provided by operating activities? Assume the indirect method is used.

• A) because depreciation expense is a source of cash
• B) because depreciation expense requires the outflow of cash
• C) because depreciation expense is an investing activity that should be reported in the investing section of the cash flow statement
• D) because it cancels the earlier deduction when calculating net income

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Definitions:

Source Monitoring

The process by which individuals determine the origins of memories, knowledge, or beliefs.

Reality Monitoring

The process of distinguishing between memories of actual events and those of imagined events.

Source-monitoring Error

A type of memory error where a person incorrectly attributes the source of their information or memories.

Reality-monitoring Error

A cognitive malfunction where an individual has difficulty distinguishing between what is real and what has been imagined or thought.