A company's income statement showed the following: net income, $134,000; depreciation expense, $30,000; and gain on sale of plant assets, $4,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses increased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.
A) $96,600.
B) $141,000.
C) $88,600.
D) $156,600.
E) $148,600.

Question

Quizplus · Accepted Answer

To calculate net cash provided by operating activities, start with net income ($134,000), add back non-cash expenses like depreciation ($30,000), subtract gains on sales ($4,000), and adjust for changes in working capital: add decrease in accounts receivable ($9,400), subtract increase in inventory ($18,000), subtract increase in prepaid expenses ($6,200), and add increase in accounts payable ($3,400). The calculation is: $134,000 + $30,000 - $4,000 + $9,400 - $18,000 - $6,200 + $3,400 = $148,600.

A Company's Income Statement Showed the Following: Net Income, $134,000;