Final Answer:
Net cash provided by operating activities for the year, using the indirect method, net cash provided by operating activities for the year is $45,000.
Step-by-step explanation:
Net income of $30,000 serves as the starting point for the indirect method. Adjustments are made to reconcile net income to the net cash provided by operating activities. The increase in Accounts Receivable by $7,000 indicates less cash collected than the revenue recognized, reducing operating cash flow. The decrease in Accounts Payable by $3,000 suggests less cash paid than expenses recognized, positively impacting operating cash flow. Depreciation expense of $5,000, a non-cash expense, is added back to the net income. Additionally, the purchase of Equipment for $40,000 with cash is a cash outflow and is subtracted from the net income.
These adjustments yield a net increase of $15,000 ($7,000 - $3,000 + $5,000 - $40,000) to the net income. Therefore, the net cash provided by operating activities, when combined with the net income, stands at $45,000 ($30,000 + $15,000), indicating that operating activities provided $45,000 of cash for the period.
The increase in Accounts Receivable and the decrease in Accounts Payable both affect cash flow as they reflect differences between the recognition of revenue and actual cash collection, as well as the recognition of expenses and actual cash payments. Depreciation expense, being a non-cash item, is added back to reconcile net income to cash generated from operating activities. The cash purchase of Equipment directly impacts the cash flow statement, subtracting the cash outflow from the net income to determine the final cash provided by operating activities.