A company had net income of $990,000. Depreciation expense is $110,000. During the year, accounts receivable and inventory increased $60,000 and $160,000, respectively. Prepaid expenses and accounts payable decreased $8,000 and $16,000, respectively. There was also a loss on the sale of equipment of $12,000. How much cash was provided by operating activities?
A) $860,000.
B) $884,000.
C) $1,180,000.
D) $1,228,000.

Question

Quizplus · Accepted Answer

To calculate cash provided by operating activities, start with net income ($990,000), add back non-cash expenses like depreciation ($110,000) and loss on sale of equipment ($12,000). Adjust for changes in working capital: subtract increases in accounts receivable ($60,000) and inventory ($160,000), and subtract decreases in prepaid expenses ($8,000) and accounts payable ($16,000). The calculation is: $990,000 + $110,000 + $12,000 - $60,000 - $160,000 - $8,000 - $16,000 = $868,000.

A Company Had Net Income of $990,000