A. The adding back of depreciation expense to net income is not done to ensure that depreciation has been properly recorded. See the correct answer for a complete explanation.
B. The adding back of depreciation expense to net income is not done to calculate net book value. See the correct answer for a complete explanation.
C. The reporting of assets at gross book value is not relevant to the statement of cash flows. See the correct answer for a complete explanation.
D. Because depreciation is a noncash expense, it should not be included in the statement of cash flows. However, it is included in net income and therefore needs to be removed from net income to calculate cash generated from operating activities. This is done by adding depreciation expense to noncom in order to reverse the depreciation expense out of net income.
