Use the following information and the indirect method to calculate the net cash provided or used by operating activities:
$\begin{array}{|l|r|}
\hline \text { Net income } & \$ 12,300 \
\hline \text { Depreciation expense } & 12,000 \
\hline \text { Payment on mortgage payable } & 15,000 \
\hline \text { Gain on sale of land } & 7,500 \
\hline \text { Increase in merchandise inventory } & 2,050 \
\hline \text { Increase in accounts payable } & 6,150 \
\hline \text { Proceeds from sale of land } & 8,000\
\hline
\end{array}$

A)$12,700
B)$13,900
C)$20,900
D)$28,400
E)$35,900

Question

Use the following information and the indirect method to calculate the net cash provided or used by operating activities:
$\begin{array}{|l|r|}
\hline \text { Net income } & \$ 12,300 \
\hline \text { Depreciation expense } & 12,000 \
\hline \text { Payment on mortgage payable } & 15,000 \
\hline \text { Gain on sale of land } & 7,500 \
\hline \text { Increase in merchandise inventory } & 2,050 \
\hline \text { Increase in accounts payable } & 6,150 \
\hline \text { Proceeds from sale of land } & 8,000\
\hline
\end{array}$

A)$12,700
B)$13,900
C)$20,900
D)$28,400
E)$35,900

Quizplus · Accepted Answer

The net cash provided by operating activities is calculated by adjusting net income for non-cash expenses, gains/losses, and changes in working capital. Start with net income ($12,300), add back depreciation ($12,000), subtract the gain on sale of land ($7,500), subtract the increase in inventory ($2,050), and add the increase in accounts payable ($6,150). This results in $20,900.

Use the Following Information and the Indirect Method to Calculate