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Describes effect of fraud on the indirect cash flow

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Problem 1: Assume NO taxes. To inflate income in Y2, a company treats an operating payment of $100 in Y2 as a capital expenditure in Y2. It had not done so in prior periods. Assume that the payment was made at the beginning of Y2. The company states that the useful life of the PP&E acquired at the beginning of Y2 is four years. Which one of the following best describes the effect of this fraud on the indirect cash flow statement?

a. Net income +100; Operating cash flow +100; Investing cash flow -100
b. Net income +75; Operating cash flow +75; Investing cash flow -100
c. Net income +75; Adjustment for depreciation +25; Operating cash flow +100; Investing cash flow -100
d. Net income +100; Adjustment for depreciation +25; Operating cash flow +125; Investing cash flow -100

Reference no: EM132976747

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