Question

Alvez reports net income of $305,000 for the year ended December 31. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, a $75,000 increase in equipment, and a $100,000 decrease in notes payable. Calculate the net increase in cash for the year.Multiple Choice$206,400.$406,400.$216,400.$281,400.$381,400.

Answer 1

The net increase in cash for the year is $206,400

Step-by-step explanation:

Computation of net increase in cash for the year is shown below:

= Net income + Depreciation expense + loss on sale of equipment - increase in accounts receivable + decrease in prepaid expense + increase in accounts payable - decrease in wages payable - decrease in notes payable - increase in equipment.

= $305,000 + $93,700 + $10,000 - $40,200 + $10,200 + $15,200 - $12,500 - $75,000 - $100,000

= $206,400

The increase in current liabilities increase in the cash as the transaction is converted into cash and vice versa while increase in current assets decrease the cash value and vice versa. And depreciation is a non cash expense which is added and loss is also added.

Thus, the net increase in cash for the year is $206,400