Use the following information and the indirect method to calculate the net cash provided or used by operating activities:
$$\begin{array} { | l | r | }
\hline \text { Net income } & \$ 85,300 \
\hline \text { Depreciation expense } & 12,000 \
\hline & \
\hline \text { Gain on sale of land } &7,500 \
\hline \text { Increase in merchandise inventory } & 2,050 \
\hline \text { Increase in accounts payable } & 6,150\
\hline
\end{array}$$
A) $69,900.
B) $108,900.
C) $93,900.
D) $85,700.
E) $81,600.

Question

Use the following information and the indirect method to calculate the net cash provided or used by operating activities:
$$\begin{array} { | l | r | } 
\hline \text { Net income } & \$ 85,300 \
\hline \text { Depreciation expense } & 12,000 \
\hline &  \
\hline \text { Gain on sale of land } &7,500 \
\hline \text { Increase in merchandise inventory } & 2,050 \
\hline \text { Increase in accounts payable } & 6,150\
\hline
\end{array}$$ 
A) $69,900.
B) $108,900.
C) $93,900.
D) $85,700.
E) $81,600.

Quizplus · Accepted Answer

To calculate the net 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's the calculation:- Start with net income: $85,300- Add back non-cash expense (depreciation): $12,000- Subtract gain on sale of land (since it's a non-operating activity): -$7,500- Adjust for increase in inventory (use of cash): -$2,050- Adjust for increase in accounts payable (source of cash): +$6,150Net cash provided by operating activities = $85,300 + $12,000 - $7,500 - $2,050 + $6,150 = $93,900.

Use the Following Information and the Indirect Method to Calculate