In preparing a company's statement of cash flows for the most recent year on the indirect method, the following information is available: Income before taxes for the year was $60,000
Accounts payable decreased by $18,000
Accounts receivable decreased by $25,000
Inventories increased by $ 5,000
Depreciation expense was $30,000
Income taxes paid was $ 8,000
Net cash provided by operating activities was:
A) $120,000.
B) $44,000.
C) $70,000.
D) $84,000.
E) $30,000.

Question

Quizplus · Accepted Answer

To calculate net cash provided by operating activities using the indirect method, start with income before taxes ($60,000), add back non-cash expenses (depreciation of $30,000), adjust for changes in working capital (accounts receivable decreased by $25,000, adding cash; inventories increased by $5,000, using cash; accounts payable decreased by $18,000, using cash), and subtract income taxes paid ($8,000). The calculation is $60,000 + $30,000 + $25,000 - $5,000 - $18,000 - $8,000 = $84,000.

In Preparing a Company's Statement of Cash Flows for the Most