A company\'s income statement showed the following: net income, $129,000; deprec

Question

A company's income statement showed the following: net income, $129,000; depreciation expense, $37,500; and gain on sale of plant assets, $11,500. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $10,900; merchandise inventory increased $25,500; prepaid expenses increased $7,700; accounts payable increased $4,900. Calculate the net cash provided or used by operating activities

A company's income statement showed the following: net income, $129,000; depreciation expense, $37,500; and gain on sale of plant assets, $11,500. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $10,900; merchandise inventory increased $25,500; prepaid expenses increased $7,700; accounts payable increased $4,900. Calculate the net cash provided or used by operating activities

Explanation / Answer

Adjusted net income = Net income + Depreciation – Gain on sale of plant assets

                                  = $129,000 + $37,500 - $11,500

                                  = $155,000

Net cash provided by operating activities = Adjusted net income + Increased in accounts payable + Decreased in accounts receivable – Increased in inventory – Increased in prepaid expenses

                                                            = $155,000 + $4,900 + $10,900 - $25,500 - $7,700

                                                            = $137,600 (Answer)

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