Highchair Limited reported a net loss of $ 10,000 for the year ended December 31, 2021. During the year, accounts receivable decreased $ 5,000, merchandise inventory increased $ 8,000, accounts payable increased by $ 10,000, and depreciation expense of $ 5,000 was recorded. During 2021, operating activities
A) used net cash of $ 2,000.
B) used net cash of $ 8,000.
C) provided net cash of $ 2,000.
D) provided net cash of $ 8,000.

Question

Quizplus · Accepted Answer

The net loss is adjusted for non-cash expenses and changes in working capital. Starting with a net loss of $10,000, add back the non-cash depreciation expense of $5,000. The decrease in accounts receivable provides $5,000, the increase in inventory uses $8,000, and the increase in accounts payable provides $10,000. The net cash provided by operating activities is $2,000.

Highchair Limited Reported a Net Loss of $ 10,000 for the Year