Question

Zokro, a nongovernmental not-for-profit organization, uses the indirect method to prepare its statement of cash flows. In determining its net cash provided (used) by operating activities, Sokro must add back which of the following to the change in net assets?
A. Purchase of equipment.
B. Payment on long-term debt.
C. Depreciation.
D. Decrease in accounts payable.

Answer 1

Answer:

C. Depreciation.

Explanation:

The Indirect method reconciles the Operating Profit to the Operating Cash flow by adjusting the following items - (1) Non-cash items previously added or deducted from Operating Profit and (2) Changes in Working Capital.The only item added back on the list is depreciation - non-cash item previously deducted from Operating Income.