Asked by Jasmyne Daise on May 29, 2024
Verified
Majorn Auto Parts Store had net income of $81,000 for the year just ended.Majorn collected the following additional information to prepare its statement of cash flows for the year: Majorn uses the indirect method to prepare its statement of cash flows.What is Majorn's net cash provided by (used in) operating activities?
A) $41,000
B) $(53,000)
C) $185,000
D) $279,000
Indirect Method
A method used in cash flow statements to adjust net income for the changes in non-cash accounts to arrive at operating cash flow.
Net Income
The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.
Operating Activities
The day-to-day actions that involve the production, sales, and delivery of a company's product or service, as reflected in its income statement.
- Assess the net cash contribution from (or requirement for) operating activities.
Verified Answer
Net income: $81,000
Depreciation expense: $135,000
Gain on sale of equipment: $(15,000)
Increase in accounts receivable: $(20,000)
Decrease in inventory: $7,000
Increase in accounts payable: $(70,000)
Net cash provided by (used in) operating activities = Net income + Depreciation expense + Gain on sale of equipment +/- Changes in current assets and liabilities
= $81,000 + $135,000 - $15,000 - $20,000 + $7,000 - $70,000
= $(53,000)
Therefore, the best choice is B.
Learning Objectives
- Assess the net cash contribution from (or requirement for) operating activities.
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