A company had profit of $230,000. Depreciation expense is $26,000. During the year, Accounts Receivable and Inventory increased $15,000 and $40,000, respectively. Prepaid Expenses and Accounts Payable decreased $2,000 and $4,000, respectively. There was also a loss on the sale of equipment of $3,000. How much cash was provided by operating activities?

Question

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To calculate cash provided by operating activities, start with the profit of $230,000. Add back non-cash expenses like depreciation ($26,000) and the loss on sale of equipment ($3,000) because they reduce net income but do not involve cash outflow. Then, adjust for changes in working capital: increase in Accounts Receivable ($15,000) and Inventory ($40,000) are uses of cash, while decrease in Prepaid Expenses ($2,000) and Accounts Payable ($4,000) also represent uses of cash. The calculation is as follows: $230,000 + $26,000 + $3,000 - $15,000 - $40,000 - $2,000 - $4,000 = $202,000.

A Company Had Profit of $230,000