Question

A company's income statement showed the following: net income, $143,000 and depreciation expense, $35,700. The company's current assets and current liabilities showed the following changes: accounts receivable decreased $11,300; merchandise inventory increased $21,800; and accounts payable increased $5,300. Calculate the net cash provided or used by operating activities.

Answer 1

Answer: To calculate the net cash provided or used by operating activities, we need to consider the changes in current assets and current liabilities, as well as the depreciation expense.

The net cash provided or used by operating activities can be calculated using the indirect method of the cash flow statement, which involves adjusting net income for non-cash expenses and changes in working capital.

Net Cash Provided or Used by Operating Activities = Net Income + Depreciation Expense +/- Changes in Working Capital

First, let's calculate the changes in working capital:

Change in Accounts Receivable = -$11,300 (decrease)

Change in Merchandise Inventory = +$21,800 (increase)

Change in Accounts Payable = +$5,300 (increase)

Next, we can substitute the given values into the formula:

Net Cash Provided or Used by Operating Activities = $143,000 (Net Income) + $35,700 (Depreciation Expense) + (-$11,300) + $21,800 + $5,300

Simplifying the equation:

Net Cash Provided or Used by Operating Activities = $143,000 + $35,700 - $11,300 + $21,800 + $5,300

Net Cash Provided or Used by Operating Activities = $193,500

Therefore, the net cash provided or used by operating activities is $193,500.