Question

Fox, Inc. reported net income of $300,000 for the current. Changes occurred in several balance sheet accounts as follows: Equipment $25,000 increase Accumulated depreciation 10,000 decrease Note payable 30,000 increase Additional current year information: • During the year, Fox received $20,000 for the sale of equipment costing $80,000 that was 80% depreciated. • In December, Fox purchased equipment costing $50,000 with $20,000 cash and a 12% note payable of $30,000. In Fox's statement of cash flows for the year, net cash provided by operating activities should be_______________.

Answer 1

Answer:

After making calculations it must count to 329 600

Explanation:

You have to find out what the Cash would be if non-cash transactions did not affect it:

Net income 300 000

Add finance cost 3 600

(30 000*12%)

Less depreciation 10 000

(normally, you have to add the depreciation back, but in the problem it is decreased meaning depreciation amount was decreased, so you have to deduct instead of adding it. )

Add note payables 30 000

Less profit from sales 4 000

(20 000-(80000-(80000*80%))

As for purchase of equipment, this refers to Investment activity.

Answer 2

Answer:

Cash flow from operating activities = 296, 000

The cashflow from operating activities does not include cash flows related to investing and financing activities. So while calculating Cash flow from operatin g activities we will exclude interest expense, include depreciation and exclude profit on diposal of equipment. Calculations are given below.

Net Income            = 300,000

Add interest expense = 300 (30,000*12/12)

(it is related to financing activities)

Less profit on disposal = (4000)

(20000-16000)

So Cash flow from operating activities = 296, 000

*NO information about depreciation charge.