Question

A company's income statement showed the following: net income, $134,000; depreciation expense, $30,000; and gain on sale of plant assets, $4,000. An examination of the company's current assets and current liabilities showed the following changes: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses increased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

Answer 1

Answer:

The net cash provided or used by operating activities is equal to $148,600.

Explanation:

The net cash provided or used by operating activities can be calculated using the indirect method as follows:

XTZ Co,

Calculation of The Net Cash Provided or Used by Operating Activities

(Indirect Method)

For the Year ....

Particular                                                                         Amount ($)    

Net income                                                                        134,000

Adjustment to reconcile net income:

Depreciation expense                                                       30,000

Gain on sale of plant assets                                              (4,000)

(Increase) decrease in current assets:

Decrease in accounts receivable                                       9,400

Increase in merchandise inventory                                 (18,000)

Increase in prepaid expenses                                           (6,200)

Increase (decrease) in current liabilities:

Increase in accounts payable                                             3,400    

Net cash provided or used by operating activities     148,600  

Therefore, the net cash provided or used by operating activities is equal to $148,600.