Big Toy Corporation's records show profit of $30,000; depreciation expense of $10,000; and cash dividends declared and paid of $5,000.The amount of cash used in operating activities using the indirect method is:

Question

Quizplus · Accepted Answer

The cash used in operating activities can be calculated by starting with the net profit and adjusting for non-cash expenses and changes in working capital. Here, we start with a profit of $30,000 and add back the non-cash expense of depreciation ($10,000), resulting in $40,000. Cash dividends declared and paid are not considered in the calculation of cash from operating activities; they are considered in financing activities.

Big Toy Corporation's Records Show Profit of $30,000; Depreciation Expense