Why are depreciation, depletion, and amortization added to net income when the indirect method is used to report net cash flows from operating activities?
Answer to relevant QuestionsWhere do the components of the changes in retained earnings appear in the statement of cash flows? Assume the indirect method is used to prepare the statement of cash flows. What are the most common sources of cash inflows from financing and investing activities? Describe how to compute each of the cash inflows and cash outflows from operating activities under the direct method. Describe the relationship between changes in cash and changes in noncash assets, liabilities, and stockholders’ equity. Davis Inc. reported the following information for equipment: In addition, Davis sold equipment costing $12,500 with accumulated depreciation of $8,150 for $3,800 cash, producing a $550 loss. Davis reported net income for ...
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