The net income reported on the income statement for the current year was ¥2,400,000.Depreciation was ¥500,000.Account receivable and inventories decreased by ¥100,000 and ¥300,000, respectively.Prepaid expenses and accounts payable increased, respectively, by ¥10,000 and ¥80,000.How much cash was provided by operating activities?

Question

Quizplus · Accepted Answer

Net income: ¥2,400,000
Depreciation: ¥500,000 (added back as it is a non-cash expense)
Decrease in accounts receivable: +¥100,000 (as it's a decrease in assets, it's added back)
Decrease in inventory: +¥300,000 (as it's a decrease in assets, it's added back)
Increase in prepaid expenses: -¥10,000 (as it's an increase in assets, it's deducted)
Increase in accounts payable: +¥80,000 (as it's an increase in liabilities, it's added back)

Cash provided by operating activities = Net income + Depreciation + Increase in accounts payable - Decrease in accounts receivable - Decrease in inventory - Increase in prepaid expenses
= ¥2,400,000 + ¥500,000 + ¥80,000 - ¥100,000 - ¥300,000 - ¥10,000
= ¥3,370,000.

Therefore, the answer is B.

The Net Income Reported on the Income Statement for the Current