Question

Olsen Company prepares its statement of cash flows using the indirect method. Indicate whether the item...

Olsen Company prepares its statement of cash flows using the indirect method. Indicate whether the item would be added to net income (increase), deducted from net income (decrease), or has no effect on net income to determine net cash flows from operating activities. Depreciation expense, which is included on the income statement.

None of the options listed

All of the options listed

Decrease

Increase

No effect

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer:

Depreciation is a non cash item which are considered for the determination of net income in the income statement of any entity. Depreciation expense are reduced the carrying value of assets & also helps in saving the tax liability as depreciation is allowable expenses.

While preparing the cash flow using the indirect method, entity should added back the depreciation expense to net income as it is a non cash item which results in reduced net income.

Therefore, Olsen Company should be add back the depreciation expense to net income to determine the net cash flow from operating activities under indirect method of cash flow statement.

Therefore, Option (d) i.e. "Increase" is the correct answer.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities....
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2018 fiscal year was $659,000. Depreciation and amortization expense of $94,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable $ 29,000 Increase in inventories 9,900 Increase prepaid expenses 9,200 Increase in salaries payable 10,700 Decrease in income taxes payable 18,000 Required:...
Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect...
Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect method. Indicate the reporting of the following transaction or event by the major categories on the statement: Entity A's income statement reveals depreciation expense of $10,000. Cash Flows From Operating Activities–Add to Net Income Cash Flows From Operating Activities–Deduct from Net Income Cash Flows From Investing Activities Cash Flows From Financing Activities Non-cash Entity A prepares its Statement of Cash Flows in accordance with...
Adjustments to Net Income with the Indirect Method Assume that a company uses the indirect method...
Adjustments to Net Income with the Indirect Method Assume that a company uses the indirect method to prepare the Operating Activities section of the statement of cash flows. For each of the following items, indicate whether it would be Added to net income, Deducted from net income, or Not Reported in this section of the statement under the indirect method. The options for each are added, deducted or not reported 1. Depreciation expense 2. Gain on sale of used delivery...
Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect...
Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect method. Indicate the reporting of the following transaction or event by major category: Taxes payable increased during the year Cash Flows From Operating Activities–Add to Net Income Cash Flows From Operating Activities–Deduct from Net Income Cash Flows From Investing Activities Cash Flows From Financing Activities Non-cash
Cash Flows from Operating Activities—Indirect Method The income statement disclosed the following items for the year:...
Cash Flows from Operating Activities—Indirect Method The income statement disclosed the following items for the year: Depreciation expense $56,100 Gain on disposal of equipment 32,750 Net income 460,500 The changes in the current asset and liability accounts for the year are as follows: Increase (Decrease) Accounts receivable $8,740 Inventory (4,980) Prepaid insurance (1,870) Accounts payable (5,930) Income taxes payable 1,870 Dividends payable 1,310 a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the...
Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the...
Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $244,900. Depreciation recorded on equipment and a building amounted to $73,200 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $64,900 $68,790 Accounts receivable (net) 82,290 84,890 Inventories 162,250 146,250 Prepaid expenses 9,020 9,700 Accounts payable (merchandise creditors) 72,490 76,770...
Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the...
Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $120,600. Depreciation recorded on store equipment for the year amounted to $19,900. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $49,330 $44,890 Accounts receivable (net) 35,370 33,170 Inventories 48,290 50,500 Prepaid expenses 5,430 4,260 Accounts payable (merchandise creditors) 46,220 42,470 Wages payable...
Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the...
Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $116,500. Depreciation recorded on store equipment for the year amounted to $19,200. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $47,530 $43,730 Accounts receivable (net) 34,080 32,320 Merchandise inventory 46,530 49,200 Prepaid expenses 5,230 4,150 Accounts payable (merchandise creditors) 44,540 41,370 Wages...
If a company is using the indirect method to prepare the statement of cash flows, identify...
If a company is using the indirect method to prepare the statement of cash flows, identify where an increase in the accounts receivable account should be reported: Multiple Choice An increase in cash flows from operating activities An increase in cash flows from investing activities A decrease in cash flows from operating activities A decrease in cash flows from investing activities An increase in cash flows from financing activities
Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the...
Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $137,900. Depreciation recorded on store equipment for the year amounted to $22,800. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $53,640 $48,810 Accounts receivable (net) 38,460 36,070 Merchandise inventory 52,510 54,910 Prepaid expenses 5,900 4,640 Accounts payable (merchandise creditors) 50,260 46,170 Wages...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT