Majorn Auto Parts Store had net income of $81,000 for the year just ended. Majorn collected the following additional information to prepare its statement of cash flows for the year: Majorn uses the indirect method to prepare its statement of cash flows. What is Majorn's net cash provided (used) by operating activities?
A)$41,000
B)($53,000)
C)$185,000
D)$279,000

Question

Majorn Auto Parts Store had net income of $81,000 for the year just ended. Majorn collected the following additional information to prepare its statement of cash flows for the year:  Majorn uses the indirect method to prepare its statement of cash flows. What is Majorn's net cash provided (used) by operating activities?
A)$41,000 
B)($53,000) 
C)$185,000 
D)$279,000

Quizplus · Accepted Answer

To calculate net cash provided (used) by operating activities using the indirect method, we need to start with the net income and make adjustments for non-cash items and changes in current assets and liabilities.

Starting with net income of $81,000, we need to add back depreciation expense of $54,000 and subtract the increase in accounts receivable of $28,000, the increase in inventory of $66,000, and the increase in accounts payable of $94,000. 
This gives us:

$81,000 (net income) 
+ $54,000 (depreciation) 
- $28,000 (increase in accounts receivable) 
- $66,000 (increase in inventory) 
- $94,000 (increase in accounts payable) 
= ($53,000)

Therefore, the net cash provided (used) by operating activities for Majorn is ($53,000).

Majorn Auto Parts Store Had Net Income of $81,000 for the Year