Statement 1: Ignoring any effects on taxes amortization of a bond premium or discount is a
non-cash item
The above statement is absolutely true bcoz amortization of a bond premium or discount is an accounting process which doesn’t involve any cas transaction.
Statement 2: If the cash flow statement is prepared using the indirect method, amortization of
bond premium is added back to net income
This statement is false because if the cash flow statement is prepared using the indirect method amortization of bond premium is deducted from to net income.
Reason – amortization of bond premium will lead to increase in the NI but not in cash as its a non cash transaction
Statement 1: Ignoring any effects on taxes amortization of a bond premium or discount is a
non-cash item
The above statement is absolutely true bcoz amortization of a bond premium or discount is an accounting process which doesn’t involve any cas transaction.
Statement 2: If the cash flow statement is prepared using the indirect method, amortization of
bond premium is added back to net income
This statement is false because if the cash flow statement is prepared using the indirect method amortization of bond premium is deducted from to net income.
Reason – amortization of bond premium will lead to increase in the NI but not in cash as its a non cash transaction