Calculate cash from operating activities using the following information: Profit $148,000.
Depreciation $40,000.
Inventory increased by $10,000.
A)$148,000.
B)$178,000.
C)$188,000.
D)$98,000.

Question

Quizplus · Accepted Answer

To calculate cash from operating activities using the indirect method, we start with net income and make adjustments for non-cash items like depreciation and changes in working capital. Using the information given, we can calculate cash from operating activities as:
Profit = $148,000
Add: Depreciation = $40,000
Add: Increase in inventory = $10,000
Cash from operating activities = $148,000 + $40,000 + $10,000 = $198,000
However, the question asks for cash from operating activities, not cash inflows from operating activities (which would include the increase in inventory). Therefore, we subtract the increase in inventory from our calculation:
Cash from operating activities = $148,000 + $40,000 - $10,000 = $178,000.
Therefore, the best choice is B.

Calculate Cash from Operating Activities Using the Following Information: Profit