Depreciation expense is a noncash item. Under the indirect method, how is it treated?

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Multiple Choice

Depreciation expense is a noncash item. Under the indirect method, how is it treated?

Explanation:
Depreciation lowers net income but doesn’t use cash during the period. The indirect method starts with net income and then adds back noncash charges to arrive at cash from operating activities. Since depreciation is a noncash expense, it is added back to net income. It isn’t treated as investing activity, and it isn’t ignored in the reconciliation.

Depreciation lowers net income but doesn’t use cash during the period. The indirect method starts with net income and then adds back noncash charges to arrive at cash from operating activities. Since depreciation is a noncash expense, it is added back to net income. It isn’t treated as investing activity, and it isn’t ignored in the reconciliation.

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