Carriveau Corporation's most recent balance sheet appears below: Net income for the year was $172. Cash dividends were $35. The company did not sell or retire any property, plant, and equipment during the year. The net cash provided by (used in) operating activities for the year was:
A) $183
B) $246
C) $(11)
D) $161

Question

Carriveau Corporation's most recent balance sheet appears below:  Net income for the year was $172. Cash dividends were $35. The company did not sell or retire any property, plant, and equipment during the year. The net cash provided by (used in) operating activities for the year was:
A) $183 
B) $246 
C) $(11) 
D) $161

Quizplus · Accepted Answer

To find the net cash provided by operating activities, we need to use the indirect method to adjust net income for non-cash items and changes in current assets and liabilities.

Starting with net income of $172, we add back any non-cash expenses and subtract any non-cash revenue. The balance sheet shows that there was no gain or loss on the sale of property, plant, and equipment, so we don't need to worry about that.

Next, we adjust for changes in current assets and liabilities. The accounts receivable increased by $(6), meaning the company collected less cash from customers than it recognized as revenue. Inventory decreased by $7, meaning the company sold more inventory than it purchased. Accounts payable decreased by $(20), meaning the company paid off some of its outstanding bills. Finally, accrued expenses increased by $2, meaning the company recognized more expenses than it paid out in cash.

Putting it all together, the net cash provided by operating activities is:

Net income $172
Add back non-cash expenses -
Subtract non-cash revenue -
Changes in current assets and liabilities:
Increase in accounts receivable (6)
Decrease in inventory 7
Decrease in accounts payable 20
Increase in accrued expenses 2
Net cash provided by operating activities $161

Therefore, the answer is D, $161.

Carriveau Corporation's Most Recent Balance Sheet Appears Below: Net