Minear Company reported net income of $450,000 for the year ended 12/31/15. Included in the computation of net income were: depreciation expense, $60,000; amortization of a patent, $32,000; income from an investment in common stock of Brett Inc., accounted for under the equity method, $48,000; and amortization of a bond discount, $12,000. Minear also paid an $80,000 dividend during the year. The net cash provided by operating activities would be reported at
A) $506,000.
B) $426,000.
C) $394,000.
D) $314,000.

Question

Quizplus · Accepted Answer

To calculate the net cash provided by operating activities, start with the net income of $450,000 and adjust for non-cash expenses and non-operating income. Add back depreciation expense ($60,000), amortization of a patent ($32,000), and amortization of a bond discount ($12,000) because these are non-cash expenses. Subtract the income from the investment accounted for under the equity method ($48,000) because it's an investing activity, not an operating activity. The dividend paid is not considered in operating activities calculation. Therefore, the net cash provided by operating activities is $450,000 + $60,000 + $32,000 + $12,000 - $48,000 = $506,000.

Minear Company Reported Net Income of $450,000 for the Year