Question

A company's income statement showed the following: net income, $124,000; depreciation expense, $30,000; and gain on sale of plant assets, $14,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses decreased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.
Select one:
a. $155,000.
b. $145,800.
c. $141,000.
d. $139,000.

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Abdul-Rahim Taysir

Answer 1

The Solution is Option 3: $ 141,000
Cash Flow from Operating Activities
Particulars	Amount (in $)	Amount (in $)
Net Income		124,000
Adjustment for Non-Cash items:
Add: Non-cash expenses
Depreciation expense	30,000
Less: Non-cash Income
Gain on sale of plant assets	(14,000)
		16,000
		140,000
Adjustment for Working Capital Changes:
Add: Decrease in Current Assets
Accounts receivable decreased	9,400
Prepaid expenses decreased	6,200
Add: Increase in Current Liabilities
Accounts payable increased	3,400
Less: Increase in Current Assets
Merchandise inventory increased	(18,000)
Less: Decrease in Current Liabilities	-
		1,000
Net Cash Inflow from Operating Activities		141,000