Statement of Cash Flows

Question 1

Indirect Method

Answer 1

Begin with Net Income

• Add back noncash expenses including depreciation, amortization and depletion
• Remove the effect of gains/losses from disposal of long term assets (this is under investing cash flows)
• adjust for changes in CURRENT assets and liabilities to remove accruals from operating activities

Question 2

What effect would US Treasury bill have on the statement of cash flows?

Answer 2

No effect since it is considered a cash equivalent