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Determine the net cash provided by operating activities.
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Answer to Problem 1MCQ
The correct answer is Option (b) $23,550 provided by operating activities.
Explanation of Solution
Statement of
Indirect method: Under indirect method, net income is reported first, and then non-cash expenses, losses from fixed assets, and changes in opening balances and ending balances of current assets are adjusted to reconcile the net income balance.
Prepare the statement of cash flows of a Company for the year under indirect method.
Company | ||
Statement of cash flows (Partial) | ||
For the year ended | ||
Particulars | Amount | Amount |
Cash flow from operating activities: | ||
Net Income | $15,200 | |
Adjustment to reconcile net income to net cash flow from operating activities: | ||
Income statement items not affecting cash: | ||
Add: | $10,000 | |
Less: Gain on sale of plant assets | ($3,000) | |
Changes in current assets and liabilities | ||
Add: Increase in accounts payable | $2,850 | |
Less: Increase in inventory | ($1,500) | $8,350 |
Net cash flows from operating activities | $23,550 |
Table (1)
From the above explanation, Option (a), (c), (d) and (e) are incorrect answers. So, the correct answer is Option (b).
Hence, the correct answer is Option (b) $23,550 provided by operating activities.
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