In preparing a company's statement of cash flows using the indirect method,the following information is available:
-Net cash provided by operating activities was:
A)$120,000.
B)$60,000.
C)$70,000.
D)$80,000.
E)$130,000.

Question

In preparing a company's statement of cash flows using the indirect method,the following information is available:  
-Net cash provided by operating activities was:
A)$120,000. 
B)$60,000. 
C)$70,000. 
D)$80,000. 
E)$130,000.

Quizplus · Accepted Answer

Net cash provided by operating activities is calculated by adding back non-cash expenses (such as depreciation and amortization) to net income and then subtracting any increases in working capital accounts (such as accounts receivable and inventory). In this case, net income is $100,000, depreciation and amortization is $20,000, and the increase in working capital accounts is $40,000. Therefore, net cash provided by operating activities is $100,000 + $20,000 - $40,000 = $120,000.

In Preparing a Company's Statement of Cash Flows Using the Indirect