Question

A company's income statement showed the following: net income, $127,000; depreciation expense, $36,500; and gain on sale of plant assets, $10,500. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $10,700; merchandise inventory increased $24,500; prepaid expenses increased $7,500; accounts payable increased $4,700. Calculate the net cash provided or used by operating activities.

Multiple Choice

• $177,400.

• $156,200.

• $149,400.

• $151,400.

Answer 1

Ans.	The given options are not correct.
	Correct answer would be $136,400.
	Particulars		Amount
	Cash flow from operating activities:
	Net income		$127,000
	Adjustments to reconcile Net income to Net cash
	provided by (used for) Operating Activities:
	Add: Depreciation expenses		$36,500
	Less: Gain on sale of plant assets		-$10,500
	Add: Decrease in accounts receivable		$10,700
	Less: Increase in merchandise inventory		-$24,500
	Less: Increase in prepaid expenses		-$7,500
	Add: Increase in accounts payable		$4,700
	Net cash Provided by (Used for) Operating Activities		$136,400
	*Decrease in current liabilities and Increase in current assets other than cash is deducted from Net Income.
	*Increase in current liabilities and Decrease in current assets other than cash is added to Net Income.
	*Non cash & Non operating expenses are added to Net income.
	*Non cash & Non operating income are deducted from Net income.