Smithson Corporation had the following selected balance sheet changes for the past year: The company's operating income for the year was $35,000. What is the net cash provided by operating activities for last year on the statement of cash flows for Smithson Corporation (using the indirect method)?

Question

Smithson Corporation had the following selected balance sheet changes for the past year:  The company's operating income for the year was $35,000. What is the net cash provided by operating activities for last year on the statement of cash flows for Smithson Corporation (using the indirect method)?

Quizplus · Accepted Answer

Using the indirect method, we start with net income and adjust for non-cash expenses and changes in current assets and liabilities. 
Starting with net income of $22,000: 
Add depreciation: $12,000 
Subtract increase in accounts receivable: $4,000 
Add increase in accounts payable: $20,000 
Subtract increase in accrued expenses: $5,000 
Net cash provided by operating activities: $45,000

Smithson Corporation Had the Following Selected Balance Sheet Changes for the Past