Question

Ramon Company reports net income of $305,000 for the year ended December 31, 2019. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, a $75,000 increase in equipment (cash is involved), and a $100,000 decrease in long - term notes payable (cash is involved). Calculate the increase in cash for Year ended December 31, 2019.
Select one:
a. $381,400.
b. $206,400.
c. $281,400.
d. $216,400.

Select one:
a. payment of dividends.
b. sale of treasury stock.
c. payment of principal amounts of long-term debt.
d. payment of interest on long-term debt

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Answer 1

Answer: b.$206,400

Calculations:

Cash flows from operating activities:
Net income		$305,000
Adjustments:
Depreciation expense	$93,700
Loss on sale of equipment	$10,000
Increase in accounts receivable	($40,200)
Decrease in prepaid expenses	$10,200
Increase in accounts payable	$15,200
Decrease in wages payable	($12,500)	$76,400
Net cash flows from operating activities		$381,400
Cash flows from investing activities
Purchase of equipment	($75,000)
Net Cash flows from investing activities		($75,000)
Cash flows from financing activities:
cash paid for long-term notes	($100,000)
Net Cash flows from financing activities:		($100,000)
Net increase(decrease) in cash		$206,400