Operating Activities: Indirect Method Video Lessons

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Problem: The statement of cash flows (indirect method) reports depreciation expense as an addition to net income because depreciation  A. causes an inflow of funds for the replacement of assets. B. reduces reported net income of the period but does not involve an outflow of cash for that period. C. is a direct use of cash. D. reduces reported net income and causes an inflow of cash.

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Problem Details

The statement of cash flows (indirect method) reports depreciation expense as an addition to net income because depreciation 

A. causes an inflow of funds for the replacement of assets.

B. reduces reported net income of the period but does not involve an outflow of cash for that period.

C. is a direct use of cash.

D. reduces reported net income and causes an inflow of cash.

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Based on our data, we think this problem is relevant for Professor Kreiser's class at ISU.