Question

The net income for the current year was $30,000. The following items occurred throughout the year. Using the indirect method, determine the net cash provided/(used) by operating activities.

• Decrease in Cash of 3,500
• Increase in short-term investments of $4,500
• Decrease in inventory of $6,000
• Decrease in prepaid expenses of $1,000
• Increase in accounts receivable of $5,500
• Loss on disposal of plant asset $3,000
• Increase in salary payable of $2,000
• Decrease in accounts payable of $7,000
• Increase in dividends payable of $1,000
• Amortization expense of $5,000

What is the net cash provided by operating activities using the indirect method?

Answer 1

Net cash provided by Operating activities using (indirect method) :

	$	$
Net income for the current year		30,000
Add: Amortization expenses		5,000
Add: Loss on disposal of plant assets		3,000
Net cash before before WC change		38,000
WC changes :		(2,500)
Decrease in inventory	6,000
Decrease in prepaid expenses	1,000
Increase in accounts receivable	(5,500)
Increase in salaries payable	2,000
Decrese in accounts payable	(7,000)
Increase in Dividend payable	1,000
Net cash Provided by Operating activities		$ 35,500

Cash and short term investments are considered as cash and cash equivalents.