Cinno Company reported net income of $20,000 for the year ended December 31,2014.During the year,inventories decreased by $7,000,accounts payable decreased by $8,000,depreciation expense was $10,000,and accounts receivable increased by $6,500.Net cash provided by operations in 2014,computed using the indirect method was:
A)$10,500.
B)$22,500.
C)$38,500.
D)$51,500.

Question

Quizplus · Accepted Answer

To calculate net cash provided by operations using the indirect method, start with net income ($20,000), add back non-cash expenses like depreciation ($10,000), and adjust for changes in working capital: add the decrease in inventories ($7,000), subtract the decrease in accounts payable ($8,000), and subtract the increase in accounts receivable ($6,500). The calculation is $20,000 + $10,000 + $7,000 - $8,000 - $6,500 = $22,500.

Cinno Company Reported Net Income of $20,000 for the Year