Question

All of the following might appear on an indirect method statement of cash flows except:

a) decrease in inventory
b) interest received on notes receivable
c) loss on sale of capital assets
d) depreciation expense

Answer 1

Depreciation expense is the item that would not appear on an indirect method statement of cash flows because it is a non-cash charge and would be added back to net income.

Step-by-step explanation:

The item that would not appear on an indirect method statement of cash flows is d) depreciation expense. The indirect method starts with net income and adjusts for changes in balance sheet items that affect available cash, but does not list expenses that do not affect cash flow, such as depreciation. Instead, non-cash charges like depreciation are added back to net income. Adjustments typically include changes in current assets and liabilities, such as a decrease in inventory, and cash transactions that are not from operating activities but nonetheless affect operating cash flow, like interest received on notes receivable and loss on sale of capital assets.