Asked by Justene Hirsig on Jul 22, 2024
Verified
Mayweather reports net income of $305,000 for the year ended December 31.It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment.Its comparative balance sheet reveals a $40,200 increase in accounts receivable,a $10,200 decrease in prepaid expenses,a $15,200 increase in accounts payable,a $12,500 decrease in wages payable,a $75,000 increase in equipment,and a $100,000 decrease in notes payable.Calculate the net increase in cash for the year.
A) $216,400.
B) $281,400.
C) $381,400.
D) $206,400.
E) $406,400.
Depreciation Expense
The allocation of the cost of a tangible asset over its useful life, reflecting the consumption of the asset.
Comparative Balance Sheet
A comparative balance sheet presents financial positions of a business at different periods side by side to help in analyzing trends over time.
Net Increase
The total amount by which a value or quantitative measure has grown compared to a previous measurement or period.
- Recognize and compute cash flows generated by operational activities through both direct and indirect approaches.
- Analyze the effects of variations in current assets and liabilities on cash flow movements.
Verified Answer
SN
Shubham NayakJul 23, 2024
Final Answer :
D
Explanation :
To calculate the net increase in cash, we need to use the following formula:
Net Income + Depreciation Expense - Loss on Sale of Equipment + Decrease in Accounts Receivable - Decrease in Prepaid Expenses - Increase in Accounts Payable + Increase in Wages Payable - Increase in Equipment - Decrease in Notes Payable
Plugging in the given numbers, we get:
$305,000 + $93,700 - $10,000 + (-$40,200) - (-$10,200) + $15,200 - (-$12,500) - $75,000 - (-$100,000) = $206,400
Therefore, the net increase in cash for the year is $206,400. The correct answer is D.
Net Income + Depreciation Expense - Loss on Sale of Equipment + Decrease in Accounts Receivable - Decrease in Prepaid Expenses - Increase in Accounts Payable + Increase in Wages Payable - Increase in Equipment - Decrease in Notes Payable
Plugging in the given numbers, we get:
$305,000 + $93,700 - $10,000 + (-$40,200) - (-$10,200) + $15,200 - (-$12,500) - $75,000 - (-$100,000) = $206,400
Therefore, the net increase in cash for the year is $206,400. The correct answer is D.
Learning Objectives
- Recognize and compute cash flows generated by operational activities through both direct and indirect approaches.
- Analyze the effects of variations in current assets and liabilities on cash flow movements.