Use the following information and the indirect method to calculate the net cash provided or used by operating activities:
A)$69,900.
B)$108,900.
C)$93,900.
D)$85,700.
E)$81,600.

Question

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: 
A)$69,900. 
B)$108,900. 
C)$93,900. 
D)$85,700. 
E)$81,600.

Quizplus · Accepted Answer

To calculate net cash provided or used by operating activities using the indirect method, we start with net income and make adjustments for non-cash items and changes in current assets and liabilities.

Starting with net income of $80,000, we add back depreciation of $10,000 (a non-cash expense) and subtract the increase in accounts receivable of $2,000 and the increase in prepaid expenses of $1,000 (both decreases in current assets, which increase cash flow). We also add the decrease in accounts payable of $3,000 (an increase in current liabilities, which decreases cash flow).

Net cash provided or used by operating activities is:

$80,000 + $10,000 - $2,000 - $1,000 - $3,000 = $93,900

Therefore, the best choice is C, $93,900.

Use the Following Information and the Indirect Method to Calculate