Question

Scranton, Inc. reports net income of $260,000 for the year ended December 31. It also reports $100,700 depreciation expense and a $6,500 gain on the sale of equipment. Its comparative balance sheet reveals a $41,500 decrease in accounts receivable, a $18,750 increase in accounts payable, and a $14,500 decrease in wages payable. Calculate the cash provided (used) in operating activities using the indirect method.

Answer 1

$399,950

Explanation:

The computation of cash provided (used) in operating activities using the indirect method is shown below:-

Cash flow from operating activities

Net income reported $260,000

Add: depreciation expenses $100,700

Less: gain on sale of equipment -$6,500

Add: decrease in accounts receivables $41,500

Add: increase in accounts payable $18,750

Less: decrease in wages payable -$14,500

Cash flow from operating activities $399,950

We simply added the cash inflows and deduct the cash outflows to reach out the operating activities