Explain why, when utilizing the indirect method, depreciation expenditure, depletion expense, and amortization expense are added to net income in the operational activities part of the statement of cash flows rather of being included in the net income.

Explain why, when utilizing the indirect method, depreciation expenditure, depletion expense, and amortization expense are added to net income in the operational activities part of the statement of cash flows rather of being included in the net income.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Which of the following phrases best describes the term " actual cash value"? a. market value b. appraised value c. replacement cost less depreciation d. original cost less depreciation
Is there any significance that can be attributed to whether net cash flows are generated from operating activities, versus investing and/or financing activities? Explain.
When using the indirect method of determining net cash flows from operating activities, how are revenues and expenses reported on the statement of cash flows if their cash effects are identical to the amounts reported in the income statement?
In a cash flow statement which one of the following would appear as an inflow of cash? O The profit on sale of a fixed asset. A repayment of debenture loans. An issue of shares at a premium, An increase in stock during the year.
Which of the following sections of the statement of cash flows include activities that increase and decrease long-term assets? the investing activities section Should not be reported on cash flow statement OO the financing activities section the operating activities section
When Generating a Statement of Cash Flows, the direct method of preparation would result in a greater value in Net Cash Provided by Operating Activities then the Indirect Method True False
Provide a brief explanation of why depreciation of capital assets is considered in determining potential net income from an investment, but not included in determining the net cash flow of an investment.
The two approaches to reporting cash flows provided by operating activities are the a. the liquidity and profitability methods. b. the basic and standard methods. c. direct and indirect methods. d. the gross margin and contribution margin methods.
When calculating the cash flows from operating activities which of thefollowing statements is true?a) The tax paid should be deductedb) The interest payable should be deductedc) The tax paid should be addedd) None of the above