Question

Fox, Inc. reported net income of $300,000 for the current. Changes occurred in several balance sheet

accounts as follows:

Equipment $25,000 increase

Accumulated depreciation 40,000 increase

Note payable 30,000 increase

Additional current year information:

• During the year, Fox sold equipment costing $25,000, with accumulated depreciation of $12,000, for a gain of $5,000.

• In December, Fox purchased equipment costing $50,000 with $20,000 cash and a 12% note payable of $30,000.

• Depreciation expense for the year was $52,000.

In Fox's statement of cash flows for the year, net cash provided by operating activities should be:

Answer 1

$347,000

Step-by-step explanation:

Cash flow, operating activities:

Net income $300,000

Depreciation expense 52,000

Gain on sale of equipment (5,000)

Cash provided by operations $347,000

Depreciation expense ($52,000) does not indicate any cash being paid, hence it must be added to Net Income.

The $5,000 must be subtracted from Net Income in the Operating Section, because the $18,000 ($25,000-$12,000+$5,000) contains the $5,000 of cash received, and it should be shown increasing the Net Income only in the Investing Section.

Hope this helps!