Question

Alvez reports net income of $347,500 for the year ended December 31. It also reports $115,800 depreciation expense and a $12,550 loss on the sale of equipment. Its comparative balance sheet reveals a $50,400 increase in accounts receivable, a $12,750 decrease in prepaid expenses, a $19,450 increase in accounts payable, a $15,900 decrease in wages payable, a $93,700 increase in equipment, and a $125,500 decrease in notes payable. Calculate the net increase in cash for the year.

Answer 1

Answer: $222,550

Explanation: As we know that :-

Net cash increase = cash flow from operating activities + cash flow from investing activities + cash flow from financing activities

we can calculate these cash flows as follows :-

cash flow from operating activities = net income +  depreciation expense + loss on sale of equipment + increase in accounts payable - increase in accounts receivable + decrease in wages payable

cash flow from operating activities = 347,500 + 115800 + 12,550 + 12,750 +19,450 - 50,400 - 15,900  = $441,750

similarly,

cash flow from investing activities = purchase of equipment = -$93700

cash flow from financing activities= notes payable payments =-$125,500

so,

Net cash increase =  $441,750  -$93700 -$125,500 =  $222,550