Asked by Nawaf AMehemeed on Jun 25, 2024
Verified
Net income reported for the current year was $222,000.Depreciation expense was $35,000.Accounts Receivable and Inventories increased $4,000 and $7,000, respectively.Prepaid Expenses and Accounts Payable decreased $3,000 and $9,000, respectively.Using the indirect method, how much cash was provided by operating activities?
A) $170,000
B) $180,000
C) $240,000
D) $258,000
Depreciation Expense
The allocation of the cost of a tangible asset over its useful life.
Prepaid Expenses
Expenses paid in advance for goods or services to be received in the future.
Accounts Receivable
Amounts owed to a company by customers for goods or services provided on credit.
- Calculate cash flows from operating activities using the indirect method.
Verified Answer
CK
Carly kichlerJun 27, 2024
Final Answer :
C
Explanation :
To calculate cash provided by operating activities using the indirect method, start with net income and adjust for non-cash expenses and changes in working capital. Here, start with net income of $222,000, add back depreciation expense of $35,000, subtract increases in accounts receivable ($4,000) and inventories ($7,000), and add the decrease in prepaid expenses ($3,000). The decrease in accounts payable ($9,000) is subtracted because it represents a cash outflow. The calculation is $222,000 + $35,000 - $4,000 - $7,000 + $3,000 - $9,000 = $240,000.
Learning Objectives
- Calculate cash flows from operating activities using the indirect method.
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