Profit reported for the current year was $200,000.Depreciation expense was $35,000.During the year, Accounts Receivable and Merchandise Inventory increased $18,000 and $26,000, respectively.Prepaid Expenses and Accounts Payable decreased $4,000 and $9,000, respectively.There was also a loss on the sale of equipment of $6,000.Using the indirect method, how much cash was provided by operating activities?

Question

Quizplus · Accepted Answer

The net income is adjusted for non-cash expenses such as depreciation and losses, and for changes in current assets and liabilities that affected operating activities, as follows:

Net income: $200,000 
Add: Depreciation expense: $35,000 
Add: Loss on sale of equipment: $6,000 
Add: Decrease in accounts payable: $9,000 
Add: Increase in accounts receivable: $18,000 
Subtract: Increase in merchandise inventory: ($26,000) 
Subtract: Decrease in prepaid expenses: ($4,000)

Cash provided by operating activities: $192,000

Profit Reported for the Current Year Was $200,000