Asked by Arlisa Flores on Jul 17, 2024
Verified
Bush Company reported net income of $60000 for the year. During the year accounts receivable decreased by $8000 accounts payable increased by $4000 and depreciation expense of $5000 was recorded. Net cash provided by operating activities for the year is
A) $48000.
B) $77000.
C) $59000.
D) $55000.
Operating Activities
Business functions directly related to providing goods or services, such as sales, production, and day-to-day administration.
Depreciation Expense
The systematic allocation of the cost of a tangible asset over its useful life, reflecting the asset’s consumption or wear and tear.
Accounts Receivable
Accounts receivable is a balance sheet item representing money owed to a business for goods or services delivered but not yet paid for by customers.
- Identify the net cash position resulting from operating, investing, and financing proceedings.
- Understand thoroughly the direct and indirect methods for the determination of cash flows from operating activities.
- Ascertain the effect of adjustments in accounts receivable, inventory, and accounts payable on cash flow movement.
Verified Answer
PK
Panatula krishna tejaJul 20, 2024
Final Answer :
B
Explanation :
To calculate net cash provided by operating activities, start with the net income of $60,000. Adjust for the decrease in accounts receivable by adding $8,000 (since a decrease in accounts receivable means cash was received), add the increase in accounts payable of $4,000 (since an increase in accounts payable means cash payment was deferred), and add back the non-cash depreciation expense of $5,000. The total is $60,000 + $8,000 + $4,000 + $5,000 = $77,000.
Learning Objectives
- Identify the net cash position resulting from operating, investing, and financing proceedings.
- Understand thoroughly the direct and indirect methods for the determination of cash flows from operating activities.
- Ascertain the effect of adjustments in accounts receivable, inventory, and accounts payable on cash flow movement.