Anew Health Care Company reports net income of $200,000 and Depreciation Expense of $20,000 for the year ending December 31,2015.No long-term assets were sold or exchanged during 2015.They also have the following data available: Using the indirect method,what is the net cash provided (or used)from operating activities for the year ending December 31,2015?
A)$70,000
B)$90,000
C)$120,000
D)$190,000

Question

Anew Health Care Company reports net income of $200,000 and Depreciation Expense of $20,000 for the year ending December 31,2015.No long-term assets were sold or exchanged during 2015.They also have the following data available:  Using the indirect method,what is the net cash provided (or used)from operating activities for the year ending December 31,2015?
A)$70,000 
B)$90,000 
C)$120,000 
D)$190,000

Quizplus · Accepted Answer

To calculate the net cash provided (or used) from operating activities, we need to adjust the net income by adding back the depreciation expense and then making adjustments for changes in current assets and current liabilities using the indirect method.

Starting with net income of $200,000, we add back depreciation expense of $20,000 to get a subtotal of $220,000.

Next, we make adjustments for changes in current assets and current liabilities using the following formula:

Net cash provided by operating activities = Subtotal + Decrease in current assets - Increase in current liabilities

Applying this formula to the available data:

Net cash provided by operating activities = $220,000 + $50,000 (decrease in accounts receivable) - $180,000 (increase in accounts payable)

= $220,000 + $50,000 - $180,000

= $90,000

Therefore, the correct choice is B) $90,000.

Anew Health Care Company Reports Net Income of $200,000 and Depreciation