Adjustments to Net Income with the Indirect Method Assume that a company uses the indirect method to

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Adjustments to Net Income with the Indirect Method Assume that a company uses the indirect method to prepare the Operating Activities section of the statement of cash fl ows. For each of the following items, indicate whether it would be added to net income (A), deducted from net income (D), or not reported in this section of the statement under the indirect method (NR).

______ 1. Depreciation expense ______ 2. Gain on sale of used delivery truck ______ 3. Increase in accounts receivable ______ 4. Increase in accounts payable ______ 5. Purchase of new delivery truck ______ 6. Loss on retirement of bonds ______ 7. Increase in prepaid rent ______ 8. Decrease in inventory ______ 9. Issuance of note payable due in three years ______ 10. Amortization of patents AppendixLO1

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