Illies Corporation's comparative balance sheet appears below: The company did not dispose of any property, plant, and equipment during the year. Its net income for the year was $5,000 and its cash dividends were $4,000. The company did not issue any bonds payable or purchase any of its own common stock during the year. Its net cash provided by operating activities and net cash used in financing activities are:
A)net cash provided by operating activities, $33,000; net cash used in financing activities, $1,000
B)net cash provided by operating activities, $35,000; net cash used in financing activities, $7,000
C)net cash provided by operating activities, $33,000; net cash used in financing activities, $7,000
D)net cash provided by operating activities, $35,000; net cash used in financing activities, $1,000

Question

Illies Corporation's comparative balance sheet appears below:  The company did not dispose of any property, plant, and equipment during the year. Its net income for the year was $5,000 and its cash dividends were $4,000. The company did not issue any bonds payable or purchase any of its own common stock during the year. Its net cash provided by operating activities and net cash used in financing activities are:
A)net cash provided by operating activities, $33,000; net cash used in financing activities, $1,000 
B)net cash provided by operating activities, $35,000; net cash used in financing activities, $7,000 
C)net cash provided by operating activities, $33,000; net cash used in financing activities, $7,000 
D)net cash provided by operating activities, $35,000; net cash used in financing activities, $1,000

Quizplus · Accepted Answer

To determine the net cash provided by operating activities, we need to look at the change in cash from one year to the next. Cash in the current year is $45,000 and in the previous year it was $32,000, a difference of $13,000. We then add back noncash expenses (depreciation) of $5,000 and subtract the net income of $5,000 to get a net cash provided by operating activities of $13,000.

To determine the net cash used in financing activities, we look at changes in the long-term liabilities and equity sections. The only change is in the dividends paid, which were $4,000. Since this is a use of cash, we subtract it from the previous year's total of $3,000 to get a net cash used in financing activities of $7,000.

Therefore, the correct answer is C.

Illies Corporation's Comparative Balance Sheet Appears Below: the Company