1. The statement of cash flows (indirect method) reports depreciation as a addition to net income...
1. The statement of cash flows (indirect method) reports depreciation as a addition to net income because depreciation
A. causes an flow of funds for the replacement of assets
b. reduces net income for 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 thereby causes an inflow of cash
2. a company uses the allowance method to account for bad debts, what is the effect on each of the following accounts due to a transaction that involves collection of an account previously written off?
1. Increase Allowance for uncollectible accounts and Increase in Cash
2. no effect Allowance for uncollectible accounts and increase in cash
3. increase Allowance for uncollectible accounts and no effect in cash
4. no effect Allowance for uncollectible accounts and no effect in cash
Homework Answers
| 1 |
| The statement of cash flows (indirect method) reports depreciation as a addition to net income because depreciation reduces net income for the period but does not involve an outflow of cash for that period |
| Option B is correct |
| 2 |
| Increase Allowance for uncollectible accounts and Increase in Cash |
| Collection of an account previously written off involves reinstating the account which increases Allowance for uncollectible accounts. |
| Option 1 is correct |
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