Question

Fox Company's worksheet for the preparation of its current annual statement of cash flows included the following: --------January 1 December 31

AR $25,000 $30,000
PP Rent 19,000 14,750
unc. acts. 3,000 2,000
AP 29,250 32,000

Fox's net income is $150,000. What amount should Fox include as net cash provided by operating activities in the statement of cash flows?

Answer 1

$151,000

Step-by-step explanation:

Operating activities: It includes those transactions which affect the working capital. It would subtract the rise in current assets and a reduction in current liabilities, while adding the decline in current assets and an increase in current liabilities.

All adjustments would be reflected in working capital.

The computation of the net cash provided by operating activities is shown below:

Cash flow from operating activities

Net income $150,000

Adjustments made:

Less: Increase in Accounts receivable -$5,000 ($30,000 - $25,000)

Add: Decrease in prepaid rent $4,250 ($19,000 - $14,750)

Less: Decrease in uncollectible accounts -$1,000 ($3,000 - $2,000)

Add: Increase in accounts payable $2,750 ($32,000 - $29,250)

Net cash provided by operating activities $151,000