Buster Company reported a net loss of $6,000 for the year ended December 31, 2010. During the year, accounts receivable increased $14,000, merchandise inventory decreased $10,000, accounts payable decreased by $20,000, and depreciation expense of $10,000 was recorded. During 2010, operating activities
A) used net cash of $20,000.
B) used net cash of $28,000.
C) provided net cash of $28,000.
D) provided net cash of $18,000.

Question

Quizplus · Accepted Answer

The net loss of $6,000 is adjusted for changes in working capital and non-cash expenses. The increase in accounts receivable ($14,000) and decrease in accounts payable ($20,000) are subtracted, while the decrease in inventory ($10,000) and depreciation expense ($10,000) are added back. This results in a net cash use of $20,000.

Buster Company Reported a Net Loss of $6,000 for the Year