Daisy Corporation reported net income of $420,000 for 2014.Changes occurred in several balance sheet accounts as follows:

Additional information:
·During 2014,Daisy sold equipment costing $35,000,with accumulated depreciation of $16,800,for a gain of $7,000.
·In December 2014,Daisy purchased equipment costing $70,000 with $28,000 cash and a 12% note payable of $42,000.
·Depreciation expense for the year was $72,800.
In Daisy's 2014 statement of cash flows,net cash provided by operating activities should be
A)$476,000.
B)$485,800.
C)$492,800.
D)$499,800.

Question

Daisy Corporation reported net income of $420,000 for 2014.Changes occurred in several balance sheet accounts as follows:

Additional information:
·During 2014,Daisy sold equipment costing $35,000,with accumulated depreciation of $16,800,for a gain of $7,000.
·In December 2014,Daisy purchased equipment costing $70,000 with $28,000 cash and a 12% note payable of $42,000.
·Depreciation expense for the year was $72,800.
In Daisy's 2014 statement of cash flows,net cash provided by operating activities should be
A)$476,000. 
B)$485,800. 
C)$492,800. 
D)$499,800.

Quizplus · Accepted Answer

To calculate net cash provided by operating activities, we need to start with net income and make adjustments for non-cash items and changes in current assets and liabilities.

Starting with net income of $420,000, we can make the following adjustments:

Add back depreciation expense: $72,800
Subtract gain on sale of equipment: $7,000
Subtract increase in accounts receivable: $12,000
Add increase in accounts payable: $9,000

Therefore, net cash provided by operating activities is:

$420,000 + $72,800 - $7,000 - $12,000 + $9,000 = $485,800

Therefore, the best choice is B ($485,800).

Daisy Corporation Reported Net Income of $420,000 for 2014