Silky Hair Salon had net income of $93,000 for the year just ended. Silky collec

Question

Silky Hair Salon had net income of $93,000 for the year just ended. Silky collected the following additional information to prepare its statement of cash flows for the year:

Increase in accounts receivable $10,000

Decrease in accounts payable $2,000

Increase in retained earnings $31,000

Cash received from sale of equipment

$18,000 Loss on sale of equipment

$5,000 Depreciation expense

$16,000

Silky uses the indirect method to prepare its statement of cash flows. What is Silky’s net cash provided (used) by operating activities? A) $92,000 B) $102,000 C) $120,000 D) $126,000

Explanation / Answer

Solution:

Option B is correct.

Net Income                                                                               $93,000

Adjustments

Depreciation expense $16,000

Increase in accounts receivable                      ($10,000)

Decrease in accounts payable ($2,000)

Loss on sale of equipment $5,000           $9,000

Net cash provided (used) by operating activities $102,000

Hence, the Silky’s net cash provided (used) by operating activities is $102,000

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