In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: $$\begin{array} { l | r }
\text { Net income for the year was } & \$ 52,000 \
\hline \text { Accounts payable decreased by } & 18,000 \
\hline \text { Accounts receivable increased by } & 25,000 \
\hline \text { Inventories increased by } & 5,000 \
\hline \text { Depreciation expense was } & 30,000
\end{array}$$ Net cash provided by operating activities was:
A)$60,000.
B)$34,000.
C)$80,000.
D)$52,000.
E)$70,000.

Question

In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: $$\begin{array} { l | r } 
\text { Net income for the year was } & \$ 52,000 \
\hline \text { Accounts payable decreased by } & 18,000 \
\hline \text { Accounts receivable increased by } & 25,000 \
\hline \text { Inventories increased by } & 5,000 \
\hline \text { Depreciation expense was } & 30,000
\end{array}$$ Net cash provided by operating activities was:
A)$60,000.
B)$34,000.
C)$80,000.
D)$52,000.
E)$70,000.

Quizplus · Accepted Answer

To calculate net cash provided by operating activities using the indirect method, start with net income and adjust for changes in working capital and non-cash expenses:  Net income: $52,000  Add back depreciation (non-cash expense): $30,000  Subtract increase in accounts receivable: -$25,000  Subtract decrease in accounts payable: -$18,000  Subtract increase in inventories: -$5,000  Net cash provided by operating activities: $52,000 + $30,000 - $25,000 - $18,000 - $5,000 = $34,000.

In Preparing a Company's Statement of Cash Flows for the Most