Galaxy Corporation reported net income of $75,000 for the year. During the year, accounts receivable increased by $6,000, accounts payable decreased by $3,000 and depreciation expense of $5,000 was recorded. Using the indirect method, cash provided by operating activities for the year is
A) $80,000.
B) $78,000.
C) $70,000.
D) $71,000.

Question

Quizplus · Accepted Answer

To calculate cash provided by operating activities using the indirect method, start with net income ($75,000), add back non-cash expenses like depreciation ($5,000), subtract increases in current assets like accounts receivable ($6,000), and subtract decreases in current liabilities like accounts payable ($3,000). This results in $75,000 + $5,000 - $6,000 - $3,000 = $71,000.

Galaxy Corporation Reported Net Income of $75,000 for the Year