Stevenson Company reported a net loss of $23,000 during the year. Comparing beginning and ending balances, you determine the following: (1) accounts receivable increased by $8,000; and (2) accrued expenses payable increased by $5,000. What was the amount of cash used in operating activities during the year?
A) $10,000
B) $36,000
C) $20,000
D) $26,000

Question

Quizplus · Accepted Answer

To find the amount of cash used in operating activities, we need to adjust the net loss for changes in non-cash current assets and liabilities. 
Beginning accounts receivable = Ending accounts receivable - Increase in accounts receivable
Beginning accounts receivable = Ending accounts receivable - $8,000
Similarly, beginning accrued expenses payable = Ending accrued expenses payable - Increase in accrued expenses payable
Beginning accrued expenses payable = Ending accrued expenses payable - $5,000

Adjusted net loss = Net loss + Decrease in accounts receivable + Increase in accrued expenses payable
Adjusted net loss = -$23,000 + $8,000 + $5,000
Adjusted net loss = -$10,000

Therefore, the amount of cash used in operating activities during the year was $26,000 ($10,000 net loss adjusted with the $8,000 increase in accounts receivable and $5,000 increase in accrued expenses payable).

Stevenson Company Reported a Net Loss of $23,000 During the Year