Question

Use the following information and the indirect method to calculate the net cash provided or used by operating activities:

Net income	$ 86,100
Depreciation expense	12,800
Gain on sale of land	8,300
Increase in merchandise inventory	2,850
Increase in accounts payable	6,950

$14,300.

$38,300.

$94,700.

$30,000.

$13,300.

Answer 1

Option (c) is correct. For calculating net cash from operating activities, we have to add back the depreciation and deduct gain on sale of land (for being non operating and non cash expenses / gains) to the net income. Because earlier these items have been deducted and added respectively while calculating the net income. And, then adjust the working capital items for increase or decrease in cash.

Net income $86100

Add: Depreciation expense $12800

Less: Gain on sale of land ($8300)

Cash generated from operations $90600

Less: Increase in merchandise inventory ($2850)

Add: Increase in accounts payable $6950

Net cash from operating activities $94700