Questions
COMM_V 320 DD4 2025W1 Part A Final Exam December 15, 2025 Part A Multiple Choice - 30 minutes
Single choice
The statement of cash flows (indirect method) reports depreciation expense as an addition to profit because depreciation does which of the following?
Options
A.Reduces reported profit of the period but does not involve an outflow of cash for that period.
B.Is a direct use of cash
C.Causes an inflow of funds for the replacement of assets.
D.Reduces reported profit and causes an inflow of cash.
View Explanation
Verified Answer
Please login to view
Step-by-Step Analysis
The question asks about why depreciation expense is added back to profit in the indirect method of the statement of cash flows.
First, restating the options helps us examine each claim clearly:
- Option 1: Reduces reported profit of the period but does not involve an outflow of cash for that period.
- Option 2: Is a direct use of cash
- Optio......Login to view full explanationLog in for full answers
We've collected over 50,000 authentic exam questions and detailed explanations from around the globe. Log in now and get instant access to the answers!
Similar Questions
A company has purchased equipment on January 1, 2024, for $590,000. In 2024–2026, the company depreciated the asset on a straight-line basis with an estimated service life of eight years and an $70,000 residual value. In 2027, the company has started to change its business strategy and now believes that the equipment will be used for only another two years (five years total) but does not believe the residual value has changed. What depreciation would the company record for the year ended December 31, 2027, on this equipment?
In 2027, internal auditors discovered that the company’s accountant had debited an expense account for the $760,000 cost of a machine purchased on January 1, 2024. The machine's useful life was expected to be 5 years with no residual value. Straight-line depreciation is used by the company. The journal entry to correct the error will include a credit to accumulated depreciation of:
In 2027, management discovered that the company’s accountant had debited expense for the full cost of an asset purchased on January 1, 2024, at a cost of $37.0 million with no expected residual value. The asset’s useful life was 5 years. The company uses straight-line depreciation. Ignoring taxes and assuming the error was discovered in 2027 before preparation of the adjusting and closing entries, the correcting entry should include a:
JOHNSON LIFTS- Part 2 of 8 Johnson Lifts is another elevator-manufacturing firm based in Lethbridge, Alberta. On January 1, 2020, Johnson Lifts purchased the same gear machine for its own plant from Montanari Giulio. The final acquisition cost for Johnson for the machine is $144,000. The CEO of Johnson lifts estimates the useful life of the machine to be 12 years and the salvage value to be $21,000. The financial year-end of the company is December 31st. Assume that Johnson Lifts, which records depreciation on an annual basis, has decided to use straight-line depreciation method to depreciate the machine. On July 1, 2024, the CEO decides to revise the initial estimate of the useful life of the machine. She believes the remaining useful life of the asset to be 9.5 years, and the new salvage value as $20,000. Based on this information, answer the following questions. On July 1 2024, what is the book value of the machine? [ Select ] 102,516.45 97,875 103,000 100,437.50 120,000 92,750 80,437.50 What is total depreciation expense for 2024? [Hint: consider both pre and post revised estimates for the year.] [ Select ] 5,125 9,223.68 13,050 8,050 2,562.50 10,250 8,750 8,250
More Practical Tools for Students Powered by AI Study Helper
Making Your Study Simpler
Join us and instantly unlock extensive past papers & exclusive solutions to get a head start on your studies!