Colley Corporation's balance sheet and income statement appear below:

Cash dividends were $26. The company sold equipment for $15 that was originally purchased for $6 and that had accumulated depreciation of $2. The net cash provided by (used by) operations for the year was:
A) $120
B) $124
C) $135
D) $150

Question

Colley Corporation's balance sheet and income statement appear below:

Cash dividends were $26. The company sold equipment for $15 that was originally purchased for $6 and that had accumulated depreciation of $2. The net cash provided by (used by) operations for the year was:
A) $120 
B) $124 
C) $135 
D) $150

Quizplus · Accepted Answer

To find the net cash provided by operations, we start with net income and make adjustments for non-cash expenses and changes in current assets and liabilities. 
From the income statement, we can see that net income is $90. 
To find the adjustments, we need to look at the balance sheet and consider any changes in current assets and liabilities.
We can see that there was a decrease in accounts receivable of $6 ($95-$89) and an increase in accounts payable of $4 ($65-$61). 
Therefore, the net cash provided by operations is:
Net income + non-cash expenses - changes in current assets and liabilities
$90 + $2 (depreciation) - ($6 decrease in AR + $4 increase in AP) = $124
So, the correct answer is B.

Colley Corporation's Balance Sheet and Income Statement Appear Below