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 flows.

For each of the following items, indicate whether it would be Added to net income, Deducted from net income, or Not Reported in this section of the statement under the indirect method.

The options for each are added, deducted or not reported

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