In Computing Net Cash Provided by Operating Activities Using the Indirect

question 133

Multiple Choice

In computing net cash provided by operating activities using the indirect method,each of the following is added to net income EXCEPT:

• A)an increase in accrued expenses payable.
• B)a gain on sale of equipment.
• C)depreciation expense.
• D)a decrease in inventory.

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Definitions:

Depreciation Method

A methodical strategy for distributing the expense of a physical asset across its lifespan.

Straight-line Method

A method of allocating an asset's cost evenly over its useful life for the purposes of calculating depreciation.

MACRS

Modified Accelerated Cost Recovery System, a method of depreciation for tax purposes that allows faster depreciation in the initial years of an asset's life.

Equipment

Tangible assets used in operations, such as machinery or computers, that have a useful life beyond one accounting period.