Cinno Company reported net income of $20,000 for the year ended December 31,2018.During the year,inventories decreased by $7,000,accounts payable decreased by $8,000,depreciation expense was $10,000,and accounts receivable increased by $6,500.Net cash provided by operations in 2018,computed using the indirect method,was:
A)$10,500.
B)$22,500.
C)$38,500.
D)$51,500.

Question

Quizplus · Accepted Answer

The net cash provided by operations can be calculated using the indirect method as follows:
Net income: $20,000
Add back non-cash expenses:
Depreciation expense: $10,000
Subtract increase in current assets:
Accounts receivable: -$6,500
Subtract decrease in current liabilities:
Inventories: $7,000
Accounts payable: $8,000
Net cash provided by operations: $20,000 + $10,000 - $6,500 - $7,000 - $8,000 = $8,500
Therefore, the correct answer is B, $22,500.

Cinno Company Reported Net Income of $20,000 for the Year