Question

Cashman Company reported net income after taxes of $85,000 for the year ended 12/31/14. Included in the computation of net income were: depreciation expense, $15,000; amortization of a patent, $8,000; income from an investment in common stock of Linda Inc., accounted for under the equity method, $12,000; and amortization of a bond premium, $3,000. Cashman also paid a $20,000 dividend during the year. The net cash provided by operating activities would be reported at:

A. $57,000.
B. $73,000.
C. $77,000.
D. $93,000.

Answer 1

The net cash provided by operating activities for Cashman Company is calculated by starting with the net income after taxes and adjusting for non-cash transactions and dividends. The correct answer, $79,000, is obtained after the necessary adjustments, but this value is not listed among the provided options.

Step-by-step explanation:

The student asked how to calculate net cash provided by operating activities for Cashman Company, given several financial figures. To calculate this, we start with net income after taxes and then adjust it for non-cash expenses and income. You add back the depreciation expense ($15,000), the amortization of a patent ($8,000), and the amortization of a bond premium ($3,000), but subtract dividends paid ($20,000) and the equity method investment income ($12,000) since the investment income is not a cash activity. The correct calculation is $85,000 + $15,000 + $8,000 + $3,000 - $12,000 - $20,000, which equals $79,000, not A. $57,000, not B. $73,000, not C. $77,000, and not D. $93,000. None of the provided choices are correct; the correct answer is not listed.