Dayton Company reported a net loss of $88,000 for the year.During the year,the company had $22,000 of Depreciation Expense and incurred a $68,000 loss on the cash sale of equipment.In addition,the company had the following changes in balance sheet accounts during the year:

Using the indirect method,what is the amount of cash provided (used)by operating activities?
A)$10,000
B)($10,000)
C)$14,000
D)($58,000)
E)None of the answer choices is correct.

Question

Dayton Company reported a net loss of $88,000 for the year.During the year,the company had $22,000 of Depreciation Expense and incurred a $68,000 loss on the cash sale of equipment.In addition,the company had the following changes in balance sheet accounts during the year:

Using the indirect method,what is the amount of cash provided (used) by operating activities?

Using the indirect method,what is the amount of cash provided (used)by operating activities?
A)$10,000 
B)($10,000) 
C)$14,000 
D)($58,000) 
E)None of the answer choices is correct.

Quizplus · Accepted Answer

We need to use the indirect method to calculate the cash flow from operating activities. Starting with net loss of $88,000, we add back non-cash expenses like depreciation of $22,000. We also subtract the loss on the sale of equipment of $68,000. Then we adjust for changes in current assets and liabilities. Accounts receivable increased by $10,000, inventory decreased by $6,000, accounts payable increased by $2,000, and salaries payable decreased by $8,000. These changes result in a net increase of $10,000 in cash provided by operating activities. Therefore, the answer is (A)$10,000.

Dayton Company Reported a Net Loss of $88,000 for the Year.During