When Preparing the Statement of Cash Flows Using the Indirect

question 46

Multiple Choice

When preparing the statement of cash flows using the indirect method for determining net cash flows from operating activities, depreciation is added to net income because:

• A) It was deducted as an expense on the income statement, but does not require cash.
• B) It was deducted as an expense on the income statement and affects the amount of cash.
• C) It is a significant portion of the year's expenses.
• D) It represents a source or inflow of cash.

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Definitions:

Rationally Planned

The process of systematically organizing tasks or projects through logical and structured planning.

Thought-Out Plan

An intentionally devised strategy that has been carefully considered and organized to achieve a purpose.

Work Environment

The physical and psychological conditions in which employees perform their job duties.

Development

The process of growth, progress, or improvement in a particular area, often over time.