Question

A company's income statement showed the following: net income, $126,000; depreciation expense, $36,000; and gain on sale of plant assets, $10,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $10,600; merchandise inventory increased $24,000; prepaid expenses increased $7,400; accounts payable increased $4,600. Calculate the net cash provided or used by operating activities.

Answer 1

Answer: $135,800

Explanation: cash flow from operating activities can be calculated using following equation :-

= Net income + depreciation - gain on sale of equipment + decrease in receivables - increase in inventory - increase in prepaid expenses + increase in accounts payable

=   $126,000 +  $36,000 -  $10,000 +  $10,600 - $24,000 - $7,400 +  $4,600

= $135,800