Downsview Corp. reported net income for calendar 2020 of $ 375,000. Additional information follows: $\begin{array}{ll}
\text { Depreciation on property, plant and equipment } & \$ 187,500 \
\text { debts expense } & 68,750 \
\text { Purchase of equipment} & 31,250 \
\text { t paid on long-ter } m \text { bonds} &18,750 \
\text { sale of equinment } &106,250 \
\end{array}$ Based on the above information, the cash provided by operating activities (indirect method) for calendar 2020 is
A) $ 706,250.
B) $ 737,500.
C) $ 756,250.
D) $ 787,500.

Question

Downsview Corp. reported net income for calendar 2020 of $ 375,000. Additional information follows: $\begin{array}{ll}
 \text { Depreciation on property, plant and equipment } & \$ 187,500 \
\text { debts expense } & 68,750 \
\text { Purchase of equipment} & 31,250 \
 \text { t paid on long-ter } m \text { bonds} &18,750 \
\text { sale of equinment } &106,250 \
\end{array}$ Based on the above information, the cash provided by operating activities (indirect method) for calendar 2020 is
A) $ 706,250.
B) $ 737,500.
C) $ 756,250.
D) $ 787,500.

Quizplus · Accepted Answer

To calculate the cash provided by operating activities using the indirect method, start with the net income and adjust for non-cash expenses and changes in working capital. Here, add back depreciation ($187,500) and debts expense ($68,750) to the net income ($375,000). Purchases of equipment and sales of equipment, as well as interest paid, are not adjustments in the operating activities section but rather investing and financing activities. Therefore, the calculation is: $375,000 + $187,500 + $68,750 = $631,250. However, the correct calculation should include only the adjustments relevant to operating activities, which seems to have been miscalculated in the provided choices. Given the information and typical adjustments for the indirect method, the expected answer appears to be incorrect as none of the choices accurately reflect the correct calculation based on standard accounting practices for the indirect method. The correct approach would involve adjusting net income for non-cash expenses and changes in working capital, but without the exact changes in working capital (like receivables, payables, inventory), only depreciation and debt expense adjustments can be made. The provided answer choices and the question details do not align with the standard calculation method, suggesting a possible mistake in the formulation of the question or answer choices.

Downsview Corp Based on the Above Information, the Cash Provided by Operating