The information below was obtained from the financial statements of Faraday Corp.Based on this information,what was the amount of the net cash provided by operating activities during the current year? $\begin{array}{lrr}
& \text { Prior Year } & \text { Current Year } \
\text { Net Income } & \$ 500,000 & \$ 655,000 \
\text { Depreciation Expense } & 60,000& 72,000 \
\text { Accounts Receivable } & 89,000& 78,000 \
\text { Inventory } & 116,000 & 142,000 \
\text { Accounts Payable } & 120,000& 117,000 \
\text { Salaries and Wages Payable } & 56,000 & 68,000
\end{array}$
A)$713,000
B)$721,000
C)$661,000
D)$637,000

Question

The information below was obtained from the financial statements of Faraday Corp.Based on this information,what was the amount of the net cash provided by operating activities during the current year? $\begin{array}{lrr} 
& \text { Prior Year } & \text { Current Year } \
\text { Net Income } & \$ 500,000 & \$ 655,000 \
\text { Depreciation Expense } & 60,000& 72,000 \
\text { Accounts Receivable } & 89,000& 78,000 \
\text { Inventory } & 116,000 & 142,000 \
\text { Accounts Payable } & 120,000& 117,000 \
\text { Salaries and Wages Payable } & 56,000 & 68,000
\end{array}$
A)$713,000
B)$721,000
C)$661,000
D)$637,000

Quizplus · Accepted Answer

To calculate the net cash provided by operating activities, start with net income, then adjust for non-cash expenses and changes in working capital. Here, add depreciation expense ($72,000), decrease in accounts receivable ($11,000, since it went from $89,000 to $78,000), increase in inventory (a use of cash, so subtract $26,000), and decrease in accounts payable (a use of cash, so subtract $3,000), and increase in salaries and wages payable ($12,000). The calculation is $655,000 + $72,000 + $11,000 - $26,000 - $3,000 + $12,000 = $721,000.

The Information Below Was Obtained from the Financial Statements of Faraday