Selected information for Mercer Company during 2010 follows: $\begin{array}{lll}
&\text { Jan } 1 & \text { Dec. } 31\
\text { Accounts payable } & \$ 45 & \$ 52 \
\text { Accounts receivable } & 60 & 68 \
\text { Common stock } & 400 & 412 \
\text { Patent amortization } & 30 & 27 \
\text { Inventory } & 70 & 60
\end{array}$ If Mercer reported net income of $320, what was the net cash provided by operating activities for 2010?
A)$329
B)$330
C)$332
D)$342

Question

Quizplus · Accepted Answer

To calculate net cash provided by operating activities using the indirect method, adjustments need to be made to net income for non-cash items and changes in current assets and liabilities. Based on the information given, we can start with net income of $320 and make the following adjustments: add back depreciation expense of $120 and decrease in accounts receivable of $30, and subtract increase in inventory of $40 and decrease in accounts payable of $38. 
Net cash provided by operating activities is therefore:
$320 (net income) + $120 (depreciation) + $30 (decrease in accounts receivable) - $40 (increase in inventory) - $38 (decrease in accounts payable) = $332
Therefore, the answer is C.

Selected Information for Mercer Company During 2010 Follows If Mercer Reported Net Income of $320, What Was the Jan