Toga Corporation reported profit of $50,000 for the year. During the year, trade receivables increased by $8,000, trade payables decreased by $4,000 and depreciation expense of $6,000 was recorded. Net cash provided by operating activities for the year, using the indirect method, is
A) $54,000.
B) $44,000.
C) $50,000.
D) $56,000.

Question

Quizplus · Accepted Answer

The net cash provided by operating activities using the indirect method is calculated by adjusting net income for non-cash expenses and changes in working capital. Therefore, starting with the given net income of $50,000, we make the following adjustments:

Add back depreciation expense: $50,000 + $6,000 = $56,000
Adjust for the increase in trade receivables: $56,000 - $8,000 = $48,000
Adjust for the decrease in trade payables: $48,000 + $4,000 = $52,000

Therefore, the net cash provided by operating activities is $52,000.

Toga Corporation Reported Profit of $50,000 for the Year