Allen Company's 2016 income statement reported total revenues, $850,000 and total expenses (including $40,000 depreciation) of $720,000. The 2015 balance sheet reported the following: accounts receivable-beginning balance, $50,000 and ending balance, $40,000; accounts payable-beginning balance, $22,000 and ending balance, $28,000. Therefore, based only on this information, how much was the 2016 net cash provided by operating activities?

Question

Quizplus · Accepted Answer

Using the indirect method, we can calculate the net cash provided by operating activities:
Net income: 
Revenues $850,000 
Expenses ($720,000 + $40,000 depreciation) ($760,000) 
Net income $90,000

Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation $40,000 
Decrease in accounts receivable ($50,000 - $40,000) $10,000 
Increase in accounts payable ($28,000 - $22,000) $6,000

Net cash provided by operating activities: 
Net income $90,000 
Add: Depreciation $40,000 
Less: Decrease in accounts receivable ($10,000) 
Add: Increase in accounts payable $6,000 
Net cash provided by operating activities $126,000

Allen Company's 2016 Income Statement Reported Total Revenues, $850,000 and Total