Which of the Following Statements Best Explains the Correct Handling

question 24

Multiple Choice

Which of the following statements best explains the correct handling of depreciation on the statement of cash flows when using the indirect method?

• A) Depreciation is subtracted from net income because it causes a loss when the related plant asset is sold.
• B) Depreciation expense is a noncash expense that was subtracted to derive the accrual-basis net income, hence it is added to net income in the cash flows from operating activities section.
• C) Depreciation is subtracted in the cash flows from investing activities section because it reduces the book value of the corresponding plant asset.
• D) Depreciation adds to the company's cash account to help pay for new equipment.

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Definitions:

ERP

Enterprise Resource Planning, or ERP software, is used by organizations to efficiently manage various day-to-day business activities, ranging from accounting and procurement to project management and manufacturing.

Information Silos

Refers to a situation in which information is isolated within a department or unit within an organization, leading to inefficiencies and lack of synergy between different parts of the organization.

FAIS

Functional Area Information System, systems designed to manage data and information specific to the operations of a particular department or function within an organization.

Three Square Market

A company known for implementing microchip technology for employees, facilitating transactions and access within their facilities.