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Net income was $51,000 for the year. The accumulated depreciation balance increased by $14,000 over the year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from operations is $37,000.

a. True
b. False

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Answer:

The answer is B. False

Explanation:

Under Indirect method for Cash cash flow, the starting point is always Net income and makes adjustment for non cash transaction.

In the case of depreciation, it is added back to Net profit.

The calculation is below:

Net income ------------------ $51,000

Add back: depreciation----$14,000

Cash flow from operation--$65,000.

Since there are no changes in any transaction, we consider only depreciation.

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