Asked by Lindsay Armstrong on May 22, 2024
Verified
Refer to Exhibit 22-2.What is Rollins' net cash provided by operating activities?
A) $11, 540
B) $12, 210
C) $12, 860
D) $14, 800
Operating Activities
Activities that relate directly to the operation of a business, including sales revenue and expenses, reflected in the cash flow statement.
Decrease in Inventory
A reduction in the amount of goods available for sale or use, often reflected in financial statements and can indicate sales performance or a strategy to lower inventory levels.
Acquisition of Treasury Stock
The process by which a company buys back its own shares from the marketplace, reducing the amount of outstanding stock.
- Compute the net cash flow from operating, investing, and financing activities.
Verified Answer
- Depreciation expense: $2,500
- Increase in accounts payable: $1,000
- Increase in accrued expenses payable: $2,000
- Decrease in prepaid expenses: $600
Therefore, net cash provided by operating activities is:
Net income + Depreciation - Non-operating gains - Changes in current assets/liabilities
= $11,000 + $2,500 - $800 - $2,600
= $10,100
Adding back the increase in accounts payable and accrued expenses payable and subtracting the decrease in prepaid expenses means that Rollins had more cash available during the year than the net income would suggest. Therefore, the correct answer is C) $12,860.
Learning Objectives
- Compute the net cash flow from operating, investing, and financing activities.
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