Potter Limited reported a net loss of $10,000 for the year ended December 31, 2013. 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 2013, 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

To calculate the net cash provided by operating activities, start with the net loss of $10,000. Adjust for non-cash expenses and changes in working capital: add back depreciation expense ($5,000), decrease in accounts receivable ($5,000), increase in accounts payable ($10,000), and subtract the increase in inventory ($8,000). The total is $10,000 - $10,000 + $5,000 + $5,000 + $10,000 - $8,000 = $12,000 - $18,000 = -$2,000. Since the question asks for the net cash provided, and the calculation shows a positive adjustment of $2,000 to the net loss, the correct answer is that operating activities provided net cash of $2,000.

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