Question

21. GJ Company, a manufacturer, has provided the following information pertaining to its recent year of operation: • Net income, $500,000 • Accounts payable decreased $42,000 • Prepaid assets increased $31,000 • Depreciation expense was $53,000 • Accounts receivable decreased $41,000 • Loss on sale of a depreciable asset was $31,000 • Wages payable increased $19,000 • Unearned revenue decreased $31,000 • Patent amortization expense was $5,000 Using the indirect method, how much was GJ's net cash provided by operating activities? $545,000 $607,000 $514,000 $463,000

Answer 1

Answer: $545,000

Explanation:

Using the indirect method of formatting the Cash flow statement, the cash from operating activity is:

= Net income + Depreciation + Loss on sale of depreciable asset  + Patent amortization expense + Accounts receivable decrease +  Wages payable increased - Accounts payable decrease - Prepaid assets increased - Unearned revenue decrease

= 500,000 + 53,000 + 31,000 + 5,000 + 41,000 + 19,000 - 42,000 - 31,000 - 31,000

= $545,000