A company had net income of $465,000. Depreciation expense is $52,000. During the year, Accounts Receivable and Inventory increased $30,000 and $80,000, respectively. Prepaid Expenses and Accounts Payable decreased $4,000 and $8,000, respectively. There was also a loss on the sale of equipment of $6,000.
How much cash was provided by operating activities?

Question

Quizplus · Accepted Answer

To calculate cash provided by operating activities, start with the net income of $465,000. Add back non-cash expenses (depreciation of $52,000 and loss on sale of equipment of $6,000). Then, adjust for changes in working capital: decrease in cash due to increases in Accounts Receivable ($30,000) and Inventory ($80,000), and increase in cash due to decreases in Prepaid Expenses ($4,000) and Accounts Payable ($8,000). The calculation is $465,000 + $52,000 + $6,000 - $30,000 - $80,000 + $4,000 - $8,000 = $409,000.

A Company Had Net Income of $465,000