Wilson Company reported net income of $105,000 for the year ended December 31, 2014. 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 2014 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 net income of $105,000, add back depreciation of $18,000, subtract the gain on disposal of equipment of $9,000, add the decrease in inventories of $15,000, and subtract the decrease in accounts payable of $20,000. This results in $105,000 + $18,000 - $9,000 + $15,000 - $20,000 = $109,000.

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