In Preparing the Statement of Cash Flows for Year 5

Multiple Choice

In preparing the statement of cash flows for Year 5, internal records indicate that depreciation on manufacturing facilities totaled $500 and on selling and administrative facilities totaled $300 during the year.The firm included these amounts in cost of goods sold and selling and administrative expenses, respectively, in the income statement for Year 5.None of this $800 of depreciation required an operating cash flow during Year 5.The firm reported cash expenditures for these assets as investing activities in the earlier periods when it acquired them.The T-account work sheet entry to explain the change in the Accumulated Depreciation account.

A) adds back depreciation to net income in deriving cash flow from operations.
B) subtracts depreciation from net income in deriving cash flow from operations.
C) adds back depreciation on the selling and administrative facilities, only, to net income in deriving cash flow from operations.
D) subtracts depreciation on the selling and administrative facilities, only, from net income in deriving cash flow from operations.
E) none of the above