In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: $$\begin{array} { l | r }
\text { Net income for the year was } & \$ 52,000 \
\hline \text { Accounts payable decreased by } & 18,000 \
\hline \text { Accounts receivable increased by } & 25,000 \
\hline \text { Inventories increased by } & 5,000 \
\hline \text { Depreciation expense was } & 30,000
\end{array}$$ Net cash provided by operating activities was:
A) $60,000.
B) $34,000.
C) $80,000.
D) $52,000.
E) $70,000.

Question

In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: $$\begin{array} { l | r } 
\text { Net income for the year was } & \$ 52,000 \
\hline \text { Accounts payable decreased by } & 18,000 \
\hline \text { Accounts receivable increased by } & 25,000 \
\hline \text { Inventories increased by } & 5,000 \
\hline \text { Depreciation expense was } & 30,000
\end{array}$$ Net cash provided by operating activities was:
A) $60,000.
B) $34,000.
C) $80,000.
D) $52,000.
E) $70,000.

Quizplus · Accepted Answer

To calculate net cash provided by operating activities using the indirect method, start with net income ($52,000), add back non-cash expenses like depreciation ($30,000), and adjust for changes in working capital: subtract increases in accounts receivable ($25,000) and inventories ($5,000), and subtract the decrease in accounts payable ($18,000). The calculation is $52,000 + $30,000 - $25,000 - $5,000 - $18,000 = $34,000.

In Preparing a Company's Statement of Cash Flows for the Most