For the year ending December 31,2012,Magadena Company reports net income of $23,000 and depreciation expense of $17,000.The income tax expense for the year ending December 31,2012 is $20,000.The following data is available: What is the net cash provided(used)by operating activities for the year ended December 31,2012? Assume the indirect method is used.
A)$(20,000)
B)$23,000
C)$40,000
D)$69,000

Question

For the year ending December 31,2012,Magadena Company reports net income of $23,000 and depreciation expense of $17,000.The income tax expense for the year ending December 31,2012 is $20,000.The following data is available:  What is the net cash provided(used)by operating activities for the year ended December 31,2012? Assume the indirect method is used.
A)$(20,000) 
B)$23,000 
C)$40,000 
D)$69,000

Quizplus · Accepted Answer

Net cash provided by operating activities can be calculated using the indirect method by adjusting net income for non-cash items, such as depreciation, and changes in current assets and liabilities.

Net cash provided by operating activities = Net income + Depreciation - Increase in current assets + Increase in current liabilities

Using the information given, we can calculate:

Net cash provided by operating activities = $23,000 + $17,000 - 0 + 0 - $20,000
Net cash provided by operating activities = $69,000

Therefore, the correct answer is D.

For the Year Ending December 31,2012,Magadena Company Reports Net Income