Meyer Company reported net income of $70,000 for the year. During the year, accounts receivable increased by $7,000, accounts payable decreased by $3,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is
A) $65,000.
B) $85,000.
C) $69,000.
D) $70,000.

Question

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 of $70,000, add back depreciation of $5,000 (a non-cash expense), subtract the increase in accounts receivable of $7,000 (as it represents cash not received), and subtract the decrease in accounts payable of $3,000 (as it represents cash paid out). This results in $70,000 + $5,000 - $7,000 - $3,000 = $65,000.

Meyer Company Reported Net Income of $70,000 for the Year