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Can someone help me with statement 2 . Ans is a . Statement 2 is incorrect as per the ans . The ans says we have do deduct the amortization in indirect CF method. I don’t understand how?. Please help
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Hello,
As you understood that statement 1 is correct i.e amortisation of bond premium is non cash item that is why while calculating CFO from indirect method we deduct the same.
As you know the cash flow statement begins with net income on an accrual basis and subsequently adds and subtracts non-cash items to reconcile to actual cash flows from operations.
Hope this helps!