Question

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: net income $85,300 depreciation expense 12,000 gain on sale of land 7,500 increase in merchandise inventory 2,050 increase in accounts payable 6,150

Answer 1

Using the indirect method, the net cash is $93,900

Solution: 

Cash flow from Operating Activities
          Net Income                                                        $85,300
          Depreciation Expense                                       $12,000
          Gain on Sale of Land                                         ($7,500)
          Increase in Merchandise Inventory                    ($2,050)
          Increase in Accounts Payable                           $6,150
                                                                                   ---------------
          Net Cash                                                          $93,900

Remember:
Increase in current assets (accounts receivables, inventory), it means subtract.
Decrease in current assets, means, add.
Increase in current liabilities (accounts payable, tax liabilities), it means add.
Decrease in current liabilities, means, subtract.