Answered: In the calculation of cash from…

In the calculation of cash from operating activities, depreciation is added back because it is: A. not allowable for taxation purposes B. a cash inflow C. a financing activity D. a non-cash expense

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter11: The Statement Of Cash Flows

Section: Chapter Questions

Problem 16CE

See similar textbooks

Related questions

Q: Explain how depreciation expense is reported in the Statement of Cash Flows using the indirect…

A: Definition: Statement of cash flows: Statement of cash flow is a financial statement that shows the…

Q: In the calculation of cash flow from operating activities, the loss on the disposal of noncurrent…

A: When the company dispose any asset with a proceeds amount less than the book value of the asset ,…

Q: When the indirect method is used to determine the net cash provided by operating activities, the…

A: Loss on the sale of the non-current assets is a non-cash expense. It decreases the net income but…

Q: Explain why depreciation expense, depletion expense, and amortization expense are added to net…

A: Operating Activities: Operating activities refer to those daily activities of the company involved…

Q: Gains and losses on disposals of assets: Why are gains and losses on disposals of assets treated as…

A: Gains and losses on disposal of assets are notional gains and losses reported in the income…

Q: When using the indirect method to determine operating cash flows, how is depreciation expense…

A: Introduction: Statement of cash flows: All cash in and out flows are shown in cash flow statements.…

Q: If a business decides to switch from the indirect method to the direct method for reporting cash…

A: Cash Flows Statement - Cash Flow Statement shows the movement of Cash in the company for the…

Q: Identify the statement that is correct regarding the statement of cash flows that had been prepared…

A: A cash flow statement (CFS) is prepared by the management with the objective to evaluate the reason…

Q: In preparing cash flows provided by operating activities using the indirect method,…

A: Cash flows from operating activities is one important section of cash flow statement, which shows…

Q: Each of the following is added to net income in computing net cash provided by operating activities…

A: Statement of cash flows: Statement of cash flow is a financial statement that shows the cash and…

Q: On the statement of cash flows, depreciation would be classified as? OA financing activity. O An…

A: A cash flow statement consists of 3 sections - operating, financing and investing

Q: Depreciation is incorporated in cash flows because it: A. Is unavoidable cost B. Is a cash…

A: Depreciation: Depreciation is a method of reducing the capitalized cost of long-lived operating…

Q: Explain why, when utilizing the indirect method, depreciation expenditure, depletion expense, and…

A: Here is the Answer

Q: true or false A statement of cash flows prepared by the indirect method will disclose the cash…

A: Indirect method of cash flow statement involves a reconciliation from profit before tax, adjusting…

Q: Prepare the operating activities section of the statement of cash flows using the indirect method.…

A: Cash flow statement is a statement which is prepared to find out the cash comes in and goes out , by…

Q: Why do we exclude depreciation expense and the gain or loss on sale of an asset from the operating…

A: Operating activities are the activities that are related to the ongoing business of an individual or…

Q: Using the indirect method to prepare a statement of cash flow, the amount of depreciation expense to…

A: Answer: d. The income statement only Explanation:- Cash flow statement is a statement prepared to…

Q: If a company experienced a loss on the disposal of long-term assets, how would this be reported in…

A: Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to…

Q: Given the items below, which of the following is a subtraction from net income to arrive at…

A: Cash flow from operating activities are those activities that shows day to day operating activities

Q: Explain why depreciation, depletion, and amortization cost are added to net income in the operating…

A: The cash flow statement is prepared to record the cash flow from various activities during the…

Q: Which item does not appear on a statement of cash flows prepared by the indirect method?…

A: Concept:

Q: To determine cash payments for operating expenses for the statement of cash flows using the direct…

A: Operating expenses: These are the expenses that a business incur through its normal business and…

Q: Determining the cash flows from operating activities generally requires analyzing each item on the…

A: Cash flow statement is a statement which is prepared to find out the cash comes in and goes out , by…

Q: tion exp

A: In the indirect (addback) method for calculating cash flows, the accrual basis net income is…

Q: In preparing cash flows provided by operating activities using the indirect method, which of the…

A: The cash flows from operating activities include the cash transactions from regular business…

Q: Given the items below, which of the following is a subtraction from net income to arrive at…

A: Cashflow Statement - It is a financial statement which summarizes the amount of cash received and…

Q: Which item does not appear on a statement of cash flows prepared by the indirect method? a.…

A: Cash Flow Statement: Cash Flow Statement is a fundamental financial statement that renders valuable…

Q: When preparing a schedule for the calculation of cash generated from operating activities under the…

A: Cash flow statement provided information about the cash inflows and cash outflows of the…

Q: In a statement of cash flows using indirect method, an increase in inventory is A. deducted from…

A: Following is the answer to the given question

Q: Non-cash charges that are added back to profit in determining cash provided by operations under the…

A: Non-cash items are the ones that result in neither a cash inflow nor a cash outflow.

Q: In the statement of cash flows using indirect method, depreciation is treated as an adjustment to…

A: Depreciation expense represents the cost of tangible asset allocated over the useful life of asset.…

Q: Which of the following is a cash outflow from operating activities? * O Payment for interest expense…

A: Cash flows from operating activities are a section of a company's cash flow statement that shows the…

Q: Under the indirect method, depreciation expense is addedto net income to report cash flows from…

A: The indirect method helps the company to convert accrual basis of accounting to cash basis by…

Q: 11. When using the indirect method to prepare the operating section of a statement of cash flows,…

A: Statement of cash flows is prepared to analyze the cash inflow and outflow during a particular…

Q: The statement of cash flows does not include cash inflows and outflows for which of the following…

A: Statement of cash flows: Cash flow statement is also known as statement of cash flows. It is a…

Q: Which of the following statements about the direct and indirect methods for presenting Cash Flow…

A: Cash flow statement is a financial statement that records the inflow and outflow of cash from the…

Q: When using the indirect method to determine operating cash flows, how is depreciation expense…

A: Introduction: The cash flow statement is comprised of the following items: Cash flow statements…

Q: The method of presenting cash flow from operations where net income is adjusted for items without…

A: Cash flow from operations means the net of cash inflows and cash outflows resulting from the…

Q: When calculating the cash flows from operating activities which of the following statements is true?…

A: Cash flows from operating activities states that how much cash comes into the business and went out…

Question

In the calculation of cash from operating activities, depreciation is added back because it is:

A. not allowable for taxation purposes
B. a cash inflow
C. a financing activity
D. a non-cash expense

Rules by which an authority (usually a government) imposes a financial obligation on individuals or organizations within its domain. Property or transactions can be taxed. While taxes are primarily intended to fund the operation of a government, many tax laws are created to encourage or discourage certain behaviors by citizens or companies.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Which of the following would be classified as a cash outflow from an operating activity? a. Purchase of an investment b. Payment of dividends c. Purchase of equipment d. Payment of goods purchased from suppliers
The gain on sale of equipment is deducted from net income to arrive at operating cash flows because a. the sale of long-term assets is an operating activity. b. the gain reveals the total cash received. c. all of the cash received from the sale is reported in the operating section. d. All of these. e. None of these.
Which of these transactions would not be part of the cash flows from the operating activities section of the statement of cash flows? A. credit purchase of inventory B. sales of product, for cash C. cash paid for purchase of equipment D. salary payments to employees
True/False The purpose of the statement of cash flows is to provide information about total revenue and expenses.
Reporting Net Cash Flow from Operating Activities The following information is available for Cornelius Inc: Required: 1. Compute the net cash flows from operating activities using the indirect method. 2. CONCEPTUAL CONNECTION Explain why Cornelius was able to report net cash flow from operating activities that was higher than net income. 3. CONCEPTUAL CONNECTION What could the difference between net income and cash flow from operating activities signal to financial statement users?
Why is depreciation an addition in the operating section of the statement of cash flows, when prepared by the indirect method?
Which of the following statements is false? A. Noncash activities should be reported in accrual basis financial statements. B. Net cash flow from operating activities relates to normal business operations. C. Net income usually equals net cash flow from operating activities. D. The statement of cash flows is an essential part of the basic financial statements.
Which of the following represents a source of cash in the investing section? A. sale of investments B. depreciation expense C. decrease in accounts receivable D. decrease in bonds payable
In a statement of cash flows, receipts from sales of property, plant, and equipment generally are classified as: a. investing activities b. selling activities c. operating activities d. financing activities
Which of the following would be considered a cash outflow for investing activities? a. cash paid to purchase product for inventory b. cash paid to reacquire common stock c. cash paid to repay debt d. cash paid to purchase equipment
Classification of Cash Flows The following are several items that might be disclosed on a companys statement of cash flows presented using the indirect method. a. Net income b. Depreciation expense c. Issuance of common stock d. Loss on disposal of equipment e. Purchase of a building f. Decrease in accounts payable g. Converted bonds into common stock h. Sale of long-term investment i. Payment of interest j. Increase in inventory Required: 1. Indicate whether each item should be classified as a cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, or noncash investing and financing activity. 2. CONCEPTUAL CONNECTION Why is the proper classification of cash flows important?