Operating Cash Flows Moret Company’s cash flow statement for the current year contained the following information on cash flows provided by operations:

a. Why must noncash expenses such as depreciation be added to net income in computing the cash provided by operations?

b. If Moret Company had reported depreciation expense of $62,000 rather than $42,000, what impact would this change have on cash provided by operations for the year?
Which of the above totals would change? By what amounts?

c. In what way does an increase in accounts payable represent a cash savings?

d. Why is the computation used above in determining Moret’s cash provided by operations described as the indirect method?

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Net income Depreciation and amortization Increase in accounts receivable Decrease in inventory $ 42,000 $ 57,000 (15,000) 7,000 Increase in accounts payable 12,000 46,000 Cash provided by operations $103,000