Question

In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available:
Net income for the year was $ 52,000
Accounts payable decreased by 18,000
Accounts receivable increased by 25,000
Inventories increased by 5,000
Depreciation expense was 30,000
Net cash provided by operating activities was
A. $34,000.
B. $60,000.
C. $70,000.
D. $80,000.
E. $52,000.

Answer 1

Answer:

A. $34,000.

Explanation:

We can determine the Net cash provided by operating activities by preparing the  Cash flow from Operating Activities Section of the Cash flow Statement using the Indirect method as below

Cash flow from Operating Activities

Net income for the year                                    52,000

Adjustment for Non - Cash items :

Depreciation expense                                       30,000

Adjustment for Changes in Working Capital items :

Decrease in Accounts payable                        (18,000)

Increase in Accounts receivable                     (25,000)

Increase in Inventories                                       (5,000)

Net cash provided by operating activities       34,000

Therefore,

Net cash provided by operating activities was A. $34,000.