Question

Mast company reports net income of $317,500 for the year ended december 31. it also reports $100,200 depreciation expense and a $10,750 loss on the sale of equipment. its comparative balance sheet reveals a $43,200 increase in accounts receivable, a $10,950 decrease in prepaid expenses, a $16,450 increase in accounts payable, and a $13,500 decrease in wages payable. calculate the net increase in cash for the year.

multiple choice
a. $318,650.
b. $399,150.
c. $291,650.
d. $314,600.
e. $221,900.

Answer 1

The net increase in cash for Mast Company is calculated by adjusting the net income with non-cash expenses and changes in working capital. The correct calculation leads to a net increase in cash of $399,150, corresponding to option B.

Step-by-step explanation:

Calculating the Net Increase in Cash

To calculate the net increase in cash for Mast Company, we must adjust the net income by changes in working capital and non-cash expenses. The net income is $317,500. We add back non-cash expenses such as depreciation expense of $100,200 and the loss on the sale of equipment of $10,750. Then, we adjust for changes in working capital by subtracting the increase in accounts receivable ($43,200), adding the decrease in prepaid expenses ($10,950), adding the increase in accounts payable ($16,450), and subtracting the decrease in wages payable ($13,500).

The calculation is as follows:

Net Income: $317,500

Add: Depreciation Expense: $100,200

Add: Loss on Sale of Equipment: $10,750

Subtract: Increase in Accounts Receivable: ($43,200)

Add: Decrease in Prepaid Expenses: $10,950

Add: Increase in Accounts Payable: $16,450

Subtract: Decrease in Wages Payable: ($13,500)

After calculating these adjustments, the net increase in cash for the year is $399,150, which corresponds to option B.