Degeare Corporation's balance sheet and income statement appear below: Cash dividends were $10.The company sold equipment for $18 that was originally purchased for $10 and that had accumulated depreciation of $5.The net cash provided by (used in)operating activities for the year was:
A)$73
B)$76
C)$43
D)$63

Question

Degeare Corporation's balance sheet and income statement appear below:   Cash dividends were $10.The company sold equipment for $18 that was originally purchased for $10 and that had accumulated depreciation of $5.The net cash provided by (used in)operating activities for the year was:
A)$73 
B)$76 
C)$43 
D)$63

Quizplus · Accepted Answer

The net cash provided by (used in) operating activities can be calculated using the indirect method where we adjust net income for non-cash items and changes in working capital. Starting with net income of $50, we add back depreciation of $15 (which is a non-cash expense) and subtract the gain on sale of equipment of $3 (which is a non-operating item). We also subtract the increase in accounts receivable of $5, add the increase in accounts payable of $13, and add back the dividends paid of $10. This gives a total of $70, but we need to subtract the $7 decrease in inventory to arrive at the final answer of $63. Therefore, the correct choice is D.

Degeare Corporation's Balance Sheet and Income Statement Appear Below