Question

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: net income $ 85,300 depreciation expense 12,000 gain on sale of land 7,500 increase in merchandise inventory 2,050 increase in accounts payable 6,150

Multiple Choice:
-$69.900.
-$108,900.
-$693,900.
-$585 700.
-$81,600

Answer 1

option 2 $108,900. To calculate the net cash provided or used by operating activities using the indirect method, start with the net income and make adjustments for non-cash items and changes in current assets and liabilities.

Step-by-step explanation:

To calculate the net cash provided or used by operating activities using the indirect method, we start with the net income of $85,300 and make adjustments. We add back the depreciation expense of $12,000 since it is a non-cash expense. We also add back the gain on the sale of land of $7,500 since it is not an operating activity. Next, we subtract any increases in non-cash current assets, which in this case is the increase in merchandise inventory of $2,050. Finally, we add any increases in non-cash current liabilities, which in this case is the increase in accounts payable of $6,150.

Therefore, the calculation is:

Net Cash Provided or Used by Operating Activities = Net Income + Depreciation Expense + Gain on Sale of Land - Increase in Merchandise Inventory + Increase in Accounts Payable

Net Cash Provided or Used by Operating Activities = $85,300 + $12,000 + $7,500 - $2,050 + $6,150 = $108,900