During 2010 the DLD Company had a net income of W50,000.In addition, selected accounts showed the following changes: What was the amount of cash provided by operating activities?

Question

During 2010 the DLD Company had a net income of W50,000.In addition, selected accounts showed the following changes:  What was the amount of cash provided by operating activities?

Quizplus · Accepted Answer

To calculate cash provided by operating activities, we use the indirect method of cash flow statement preparation. We start with net income and make adjustments for non-cash items and changes in current assets and liabilities.

Using the information given in the question, we can calculate cash provided by operating activities as follows:

Net income = W50,000 
Add: Depreciation and amortization = W5,000 
Add: Increase in accounts payable = W3,000 
Add: Decrease in prepaid expenses = W1,500 
Less: Increase in accounts receivable = W9,000 
Less: Decrease in inventory = W500

Cash provided by operating activities = W50,000 + W5,000 + W3,000 + W1,500 - W9,000 - W500 = W49,500

Therefore, the best choice is A) W49,500.

During 2010 the DLD Company Had a Net Income of W50,000.In