Optics Company uses the direct method for preparing its statement of cash flow.Optics reports the following information regarding 2019: From the income statement:
Sales Revenues,$266,000
Cost of Goods Sold,$212,000
Operating Expenses,$37,000
Net Income $17,000
From the balance sheet:
$$\begin{array} { | l | r | r | }
\hline & \text { Beginning Balance } & \text { Ending Balance } \
\hline \text { Accounts Receivable } & \$ 14,900 & \$ 18,400 \
\hline \text { Merchandise Inventory } & 23,900 & 17,800 \
\hline \text { Accounts Payable } & 6100 & 13,800 \
\hline \text { Accrued Liabilities } & 4500 & 1500 \
\hline
\end{array}$$ Assume that there were no sales of long-term assets,no interest revenue,and no expenses other than the expenses shown above.Also,assume that Accounts Payable are for purchases of merchandise inventory only.Accrued liabilities relate to operating expenses.What amount will be shown for the net cash provided by operating activities?
A) $64,300
B) $24,300
C) $17,000
D) $9300

Question

Optics Company uses the direct method for preparing its statement of cash flow.Optics reports the following information regarding 2019: From the income statement:
Sales Revenues,$266,000
Cost of Goods Sold,$212,000
Operating Expenses,$37,000
Net Income $17,000
From the balance sheet:
$$\begin{array} { | l | r | r | } 
\hline & \text { Beginning Balance } & \text { Ending Balance } \
\hline \text { Accounts Receivable } & \$ 14,900 & \$ 18,400 \
\hline \text { Merchandise Inventory } & 23,900 & 17,800 \
\hline \text { Accounts Payable } & 6100 & 13,800 \
\hline \text { Accrued Liabilities } & 4500 & 1500 \
\hline
\end{array}$$ Assume that there were no sales of long-term assets,no interest revenue,and no expenses other than the expenses shown above.Also,assume that Accounts Payable are for purchases of merchandise inventory only.Accrued liabilities relate to operating expenses.What amount will be shown for the net cash provided by operating activities?
A) $64,300
B) $24,300
C) $17,000
D) $9300

Quizplus · Accepted Answer

To calculate the net cash provided by operating activities, we need to use the direct method.

Operating cash inflows:
    Sales revenue: $266,000
Operating cash outflows:
    Cost of goods sold: $212,000
    Operating expenses: $37,000
    Decrease in accounts payable: $(-6,700) [($13,200 – $6,500)]
    Increase in accrued liabilities: $3,000 [($11,500 – $8,500)]
Net cash provided by operating activities:
    $266,000 - $212,000 - $37,000 - $(-6,700) + $3,000 = $24,300

Therefore, the amount shown for the net cash provided by operating activities is $24,300, which is option B.

Optics Company Uses the Direct Method for Preparing Its Statement