Flynn Company reported a net loss of $30,000 for the year ended December 31, 2010. During the year, accounts receivable decreased $15,000, merchandise inventory increased $24,000, accounts payable increased by $30,000, and depreciation expense of $15,000 was recorded. During 2010, operating activities
A) used net cash of $6,000.
B) used net cash of $24,000.
C) provided net cash of $6,000.
D) provided net cash of $24,000.

Question

Quizplus · Accepted Answer

The net loss of $30,000 is adjusted for non-cash expenses and changes in working capital. Add back depreciation of $15,000 (a non-cash expense), add the decrease in accounts receivable of $15,000, subtract the increase in inventory of $24,000, and add the increase in accounts payable of $30,000. This results in a net cash provided by operating activities of $6,000.

Flynn Company Reported a Net Loss of $30,000 for the Year