Wilson Company reported net income of $105000 for the year ended December 31 2016. During the year inventories decreased by $15000 accounts payable decreased by $20000 depreciation expense was $18000 and a gain on disposal of equipment of $9000 was recorded. Net cash provided by operating activities in 2016 using the indirect method was
A) $101000.
B) $109000.
C) $120000.
D) $118000.

Question

Quizplus · Accepted Answer

To calculate net cash provided by operating activities using the indirect method, start with the net income of $105,000. Adjust for non-cash and working capital changes: add back depreciation expense ($18,000) and subtract the gain on disposal of equipment ($9,000) because it does not affect cash flow from operations. Adjust for changes in working capital: add the decrease in inventories ($15,000) and subtract the decrease in accounts payable ($20,000). The calculation is $105,000 + $18,000 - $9,000 + $15,000 - $20,000 = $109,000.

Wilson Company Reported Net Income of $105000 for the Year