Question

Mayweather reports net income of $327,500 for the year ended December 31. It also reports $105,400 depreciation expense and a $11,350 loss on the sale of equipment. Its comparative balance sheet reveals a $45,600 increase in accounts receivable, a $11,550 decrease in prepaid expenses, a $17,450 increase in accounts payable, a $14,300 decrease in wages payable, a $84,900 increase in equipment, and a $113,500 decrease in notes payable. Calculate the net increase in cash for the year.

Answer 1

$214,950

Step-by-step explanation:

The computation of the net increase in cash for the year is shown below:

a. Cash flow from Operating activities

Net income reported $327,500

Add: Depreciation expense $105,400

Add: Loss on sale of equipment $11,350

Less: increase in accounts receivable -$45,600

Add: decrease in prepaid expenses $11,550

Add: increase in accounts payable $17,450

Less: decrease in wages payable -$14,300

Net Cash flow from Operating activities $413,350 (a)

b. Cash flow from Investing activities

Purchase of equipment -$84,900

Net Cash flow from Investing activities -$84,900 (b)

c. Cash flow from Financing activities

Payment of note payable -$113,500

Net Cash flow from Financing activities -$113,500 (c)

net increase in cash for the year is $214,950 (a + b + c)