Rogers Company reported net income of $35,000 for the year. During the year, accounts receivable increased by $7,000, accounts payable decreased by $3,000, and depreciation expense of $8,000 was recorded. Net cash provided by operating activities under the indirect method for the year is
A) $53,000
B) $47,000
C) $33,000
D) $37,000

Question

Quizplus · Accepted Answer

To calculate the net cash provided by operating activities using the indirect method, we need to adjust the net income for the changes in operating assets and liabilities.

Starting with net income, we add back the depreciation expense (which has a non-cash effect on income) and subtract the increase in accounts receivable (which represents cash that was not collected during the year) and add the decrease in accounts payable (which represents cash that was not paid out during the year).

Net cash provided by operating activities = net income + depreciation expense - increase in accounts receivable + decrease in accounts payable

= $35,000 + $8,000 - $7,000 + $3,000

= $39,000 - $4,000

= $35,000

Therefore, the correct answer is C) $33,000.

Rogers Company Reported Net Income of $35,000 for the Year