Rodriguez Ltd uses the indirect method to prepare the cash flow statement.Refer to the following income statement:
Rodriguez Ltd
Income statement
For the year ended 31 December 2016
$$\begin{array} { | l | l | l | }
\hline \text { Sales revenue } & \$ 156,000 & \
\hline \text { Interest revenue } & 6400 & \
\hline \text { Loss on sale of non-current assets } & ( 5000 ) & \
\hline \text { Total revenues and gains } & & \$ 157,400 \
\hline \text { Cost of sales } & 110,000 & \
\hline \text { Salary expense } & 19,000 & \
\hline \text { Depreciation expense } & 7000 & \
\hline \text { Other operating expenses } & 13,200 & \
\hline \text { Interest expense } & 16,200 & \
\hline \text { Income taxexpense } & 5900 & \
\hline \text { Total expenses } & & 171,300 \
\hline \text { Profit (loss) } & & \$ \underline { - 13,900 } \
\hline
\end{array}$$
Additional information provided by the company includes the following:
Current assets,other than cash,decreased by $5200
Current liabilities increased by $2400
How much is the net cash provided by operating activities?

Question

Rodriguez Ltd uses the indirect method to prepare the cash flow statement.Refer to the following income statement:
Rodriguez Ltd
Income statement
For the year ended 31 December 2016
$$\begin{array} { | l | l | l | } 
\hline \text { Sales revenue } & \$ 156,000 & \
\hline \text { Interest revenue } & 6400 & \
\hline \text { Loss on sale of non-current assets } & ( 5000 ) & \
\hline \text { Total revenues and gains } & & \$ 157,400 \
\hline \text { Cost of sales } & 110,000 & \
\hline \text { Salary expense } & 19,000 & \
\hline \text { Depreciation expense } & 7000 & \
\hline \text { Other operating expenses } & 13,200 & \
\hline \text { Interest expense } & 16,200 & \
\hline \text { Income taxexpense } & 5900 & \
\hline \text { Total expenses } & & 171,300 \
\hline \text { Profit (loss) } & & \$ \underline { - 13,900 } \
\hline
\end{array}$$ 
Additional information provided by the company includes the following:
Current assets,other than cash,decreased by $5200
Current liabilities increased by $2400
How much is the net cash provided by operating activities?

Quizplus · Accepted Answer

To calculate the net cash provided by operating activities using the indirect method, adjustments are made to net income for non-cash items such as depreciation, changes in working capital accounts, and gains and losses. In this case, we need to adjust net income of $11,200 as follows:
Depreciation expense: $6,000
Decrease in current assets: ($5,200)
Increase in current liabilities: +$2,400
Net cash provided by operating activities: $11,200 + $6,000 - $5,200 + $2,400 = $14,400 - $2,800 = $5,700. Therefore, the correct answer is C.

Rodriguez Ltd Uses the Indirect Method to Prepare the Cash