The information below was obtained from the financial statements of Faraday Corp.Based on this information,what was the amount of the net cash provided by operating activities during the current year?
A)$713,000
B)$721,000
C)$661,000
D)$637,000

Question

The information below was obtained from the financial statements of Faraday Corp.Based on this information,what was the amount of the net cash provided by operating activities during the current year? 
A)$713,000 
B)$721,000 
C)$661,000 
D)$637,000

Quizplus · Accepted Answer

Net cash provided by operating activities can be calculated using the indirect method. Starting with net income, we adjust for non-cash items such as depreciation and amortization, and changes in current assets and liabilities.

Net income = $500,000
Depreciation and amortization = $180,000
Increase in accounts receivable = $16,000
Increase in inventory = $57,000
Decrease in accounts payable = ($32,000)
Decrease in accrued expenses payable = ($2,000)

Net cash provided by operating activities = Net income + Depreciation and amortization + Increase in accounts receivable + Increase in inventory - Decrease in accounts payable - Decrease in accrued expenses payable
= $500,000 + $180,000 + $16,000 + $57,000 - $32,000 - $2,000
= $721,000

Therefore, the correct choice is B, which is $721,000.

The Information Below Was Obtained from the Financial Statements of Faraday