Wilson Company reported net income of $105,000 for the year ended December 31, 2017. During the year, inventories decreased by $15,000, accounts payable decreased by $20,000, depreciation expense was $18,000 and a gain on disposal of equipment of $9,000 was recorded. Net cash provided by operating activities in 2017 using the indirect method was
A) $101,000.
B) $109,000.
C) $120,000.
D) $118,000.

Question

Quizplus · Accepted Answer

To calculate net cash provided by operating activities using the indirect method, start with net income and adjust for changes in working capital and non-cash expenses. Start with $105,000 net income, add back $18,000 depreciation (non-cash expense), subtract $9,000 gain on disposal (non-operating gain), add $15,000 decrease in inventories (source of cash), and subtract $20,000 decrease in accounts payable (use of cash). The result is $109,000.

Wilson Company Reported Net Income of $105,000 for the Year