Answer:
cash provided by operating activities 84,000
Explanation:
net income 75,000
Adjustment (A)
gain on land (500)
depreciation 1,500
Adjusted net income 76,000
Change in working capital
↑account receivable (3,000) (B)
↓long term AR 10,000 (C)
↑Account payable 1,000 (D)
Net changes 8,000
cash provided by operating activities 84,000
<u>Notes:</u>
(A)
The net income may have non-monetary term, we need to remove those to get and adjusted net income on a cash basis
the gain on land is not a monetary term. We will record the proceeds in cash for the sale under investment activities, not operating as the business is not selling land every year.
depreciation is an accounting metric, is not an actual expense, it doesn't involve cash.
(B)
the increasein the Ar means more sales were not collected therefore, less cash collected.
(C)
the decrease in the long term AR represent the collection, so it increases the cash
(D)
the increase in account payable represent the delay of payment, so company has more cash available.
