The information below was obtained from the financial statements of Faraday Corp. Based on this information, what was the amount of the net cash provided by operating activities during the current year?
A) $713,000
B) $721,000
C) $661,000
D) $637,000

Question

The information below was obtained from the financial statements of Faraday Corp. Based on this information, what was the amount of the net cash provided by operating activities during the current year? 
A) $713,000 
B) $721,000 
C) $661,000 
D) $637,000

Quizplus · Accepted Answer

The net cash provided by operating activities is calculated using the indirect method from the statement of cash flows. Beginning with net income, adjustments are made for non-cash items such as depreciation and changes in current assets and liabilities. From the information provided, we can see that Faraday Corp had a net income of $470,000, and made adjustments for $175,000 in depreciation and $136,000 in increases to accounts payable and accrued expenses. Adding these adjustments to net income gives us cash provided by operations of $781,000. Subtracting out the $60,000 increase in accounts receivable gives us a net cash provided by operating activities of $721,000. Therefore, the best choice is B.

The Information Below Was Obtained from the Financial Statements of Faraday