Use the following information and the indirect method to calculate the net cash provided or used by operating activities: $$\begin{array} { l | r }
\text { Net income } & \$ 85,300 \
\hline \text { Depreciation expense } & 12,000 \
\
\hline & \
\hline \text { Increase in merchandise inventory } & 2,050 \
\hline \text { Increase in accounts payable } & 6 , 1 5 0
\end{array}$$
A) $85,700.
B) $69,900.
C) $93,900.
D) $108,900.
E) $81,600.

Question

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: $$\begin{array} { l | r } 
\text { Net income } & \$ 85,300 \
\hline \text { Depreciation expense } & 12,000 \
\
\hline & \
\hline \text { Increase in merchandise inventory } & 2,050 \
\hline \text { Increase in accounts payable } & 6 , 1 5 0
\end{array}$$
A) $85,700.
B) $69,900.
C) $93,900.
D) $108,900.
E) $81,600.

Quizplus · Accepted Answer

Net cash provided by operating activities is calculated by adjusting net income for changes in working capital and non-cash expenses. Start with net income ($85,300), add back depreciation ($12,000), subtract the increase in inventory ($2,050), and add the increase in accounts payable ($6,150). This results in $85,300 + $12,000 - $2,050 + $6,150 = $101,400.

Use the Following Information and the Indirect Method to Calculate