Dayton Company reported a net loss of $88,000 for the year.During the year,the company had $22,000 of Depreciation Expense and incurred a $68,000 loss on the cash sale of equipment.In addition,the company had the following changes in balance sheet accounts during the year:
$$\begin{array} { l r }
\text { Accourts Payable } & \$ 2,000 \text { decrease } \
\text { Accourts Receivable } & \$ 14,000 \text { decrease } \
\text { Merchardise Inventory } & \$ 4,000 \text { increase }
\end{array}$$
Using the indirect method,what is the amount of cash provided (used)by operating activities?
A)$10,000
B)($10,000)
C)$14,000
D)($58,000)
E)None of the answer choices is correct.

Question

Dayton Company reported a net loss of $88,000 for the year.During the year,the company had $22,000 of Depreciation Expense and incurred a $68,000 loss on the cash sale of equipment.In addition,the company had the following changes in balance sheet accounts during the year:
$$\begin{array} { l r } 
\text { Accourts Payable } & \$ 2,000 \text { decrease } \
\text { Accourts Receivable } & \$ 14,000 \text { decrease } \
\text { Merchardise Inventory } & \$ 4,000 \text { increase }
\end{array}$$
Using the indirect method,what is the amount of cash provided (used)by operating activities?
A)$10,000
B)($10,000)
C)$14,000
D)($58,000)
E)None of the answer choices is correct.

Quizplus · Accepted Answer

Net income is a decrease in cash. Depreciation expense is a non-cash expense. Loss on sale of equipment is a non-cash expense. Decrease in accounts payable is a source of cash. Decrease in accounts receivable is a use of cash. Increase in merchandise inventory is a use of cash. Therefore, cash provided by operating activities is $88,000 + $22,000 + $68,000 + $2,000 - $14,000 - $4,000 = $10,000.

Dayton Company Reported a Net Loss of $88,000 for the Year.During