Jarvis, Inc. reported net income of $44,000 for the year ended December 31, 2015 Included in net income were depreciation expense of $8,400 and a gain on sale of equipment of $1,700. Each of the following accounts increased during 2015: $$\begin{array} { l l }
\text { Accounts receivable } & \$ 2,200 \
\text { Inventory } & \$ 4,500 \
\text { Prepaid rent } & \$ 6,800 \
\text { Available-for-sale securities } & \$ 1,000 \
\text { Accounts payable } & \$ 5,000
\end{array}$$ What is the amount of cash provided by operating activities for Jarvis, Inc. for the year ended December 31, 2015?
A) $41,200
B) $43,900
C) $32,200
D) $42,200

Question

Jarvis, Inc. reported net income of $44,000 for the year ended December 31, 2015 Included in net income were depreciation expense of $8,400 and a gain on sale of equipment of $1,700. Each of the following accounts increased during 2015: $$\begin{array} { l l } 
\text { Accounts receivable } & \$ 2,200 \
\text { Inventory } & \$ 4,500 \
\text { Prepaid rent } & \$ 6,800 \
\text { Available-for-sale securities } & \$ 1,000 \
\text { Accounts payable } & \$ 5,000
\end{array}$$ What is the amount of cash provided by operating activities for Jarvis, Inc. for the year ended December 31, 2015?
A) $41,200
B) $43,900
C) $32,200
D) $42,200

Quizplus · Accepted Answer

To calculate the cash provided by operating activities, we start with the net income of $44,000. We adjust for non-cash and working capital items as follows:- Add back depreciation expense (a non-cash item) of $8,400.- Subtract the gain on sale of equipment (a non-operating item) of $1,700, because it does not relate to operating activities.- Subtract increases in current assets (other than cash), because an increase in current assets uses cash:  - Accounts receivable increase of $2,200  - Inventory increase of $4,500  - Prepaid rent increase of $6,800- Add increases in current liabilities, because an increase in current liabilities provides cash:  - Accounts payable increase of $5,000Calculation:$$ \begin{align*}\text{Cash provided by operating activities} &= \$44,000 + \$8,400 - \$1,700 - \$2,200 - \$4,500 - \$6,800 + \$5,000 \&= \$42,200\end{align*} $$

Jarvis, Inc What Is the Amount of Cash Provided by Operating Activities