Felix Company uses the indirect method to prepare the statement of cash flows. Refer to the following income statement: Additional information provided by the company includes the following: 1)Current assets, other than cash, increased by $24,000
"2)Current liabilities decreased by $1,000
How much is the net cash provided by operating activities?"
A)$21,000
B)$34,000
C)$29,000
D)$39,000

Question

Felix Company uses the indirect method to prepare the statement of cash flows. Refer to the following income statement:  Additional information provided by the company includes the following: 1)Current assets, other than cash, increased by $24,000
"2)Current liabilities decreased by $1,000
How much is the net cash provided by operating activities?"
A)$21,000 
B)$34,000 
C)$29,000 
D)$39,000

Quizplus · Accepted Answer

To calculate the net cash provided by operating activities using the indirect method, we need to adjust net income for non-cash expenses and changes in current assets and liabilities.

Starting with net income of $60,000, we need to make the following adjustments:

- Add back depreciation expense of $12,000 (a non-cash expense)
- Subtract the increase in accounts receivable of $11,000 (an increase in an asset reduces cash flow from operations)
- Add the increase in inventory of $23,000 (an increase in an asset reduces cash flow from operations)
- Subtract the increase in accounts payable of $9,000 (an increase in a liability increases cash flow from operations)
- Add the decrease in current liabilities of $1,000 (a decrease in a liability reduces cash flow from operations)
- Add the increase in other current assets of $24,000

Net cash provided by operating activities = $60,000 + $12,000 - $11,000 + $23,000 - $9,000 + $1,000 + $24,000 = $29,000

Therefore, the correct answer is C) $29,000.

Felix Company Uses the Indirect Method to Prepare the Statement