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Appendix Statement of cash flows using indirect method For the year ending March 31, 20Y5, Omega Systems Inc. reported net income of $105,450 and paid dividends of $7,500. Comparative balance sheets as of March 31. 20Y5 and 20Y4. are as follows: Instructions Why is depreciation added to net income in determining net cash flows from operating activities? Explain.

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
Publisher: Cengage Learning
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
Publisher: Cengage Learning
ISBN: 9781305961883
Chapter 4, Problem 4.6.2P
Textbook Problem
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Appendix Statement of cash flows using indirect method
For the year ending March 31, 20Y5, Omega Systems Inc. reported net income of $105,450 and paid dividends of $7,500. Comparative balance sheets as of March 31. 20Y5 and 20Y4. are as follows:

Chapter 4, Problem 4.6.2P, Appendix Statement of cash flows using indirect method For the year ending March 31, 20Y5, Omega , example  1

Chapter 4, Problem 4.6.2P, Appendix Statement of cash flows using indirect method For the year ending March 31, 20Y5, Omega , example  2

Instructions

Why is depreciation added to net income in determining net cash flows from operating activities? Explain.

To determine

Concept Introduction:

Cash Flow statement:

The Cash flow statement shows the movement of cash during a particular period. The Cash flows are categorized into three categories as follows:

  • Cash flows from operating activities
  • Cash Flows from investing activities
  • Cash flows from financing activities
(Note: Cash flows from operating activities can be prepared using direct or indirect method)

To Indicate:

The reason of adding the depreciation in operating cash flow while preparing the Cash Flow Statement using indirect method

Explanation of Solution

The Cash flow statement shows the movement of cash during a particular period. The Cash flows are categorized into three categories as follows:

  • Cash flows from operating activities
  • Cash Flows from investing activities
  • Cash flows from financing activities
(No...

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