The net loss reported on the income statement for the current year was $10,000. Depreciation was $40,000. Accounts receivable and inventories decreased by $12,000 and $35,000, respectively. Treasury stock was purchased for $50,000, and prepaid expenses and accounts payable increased by $1,000 and $8,000, respectively. Based on this information, how much cash was provided by operating activities

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30 March, 05:38

The net loss reported on the income statement for the current year was $10,000. Depreciation was $40,000. Accounts receivable and inventories decreased by $12,000 and $35,000, respectively. Treasury stock was purchased for $50,000, and prepaid expenses and accounts payable increased by $1,000 and $8,000, respectively. Based on this information, how much cash was provided by operating activities

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Felix Steele · Answer 1

Cash was provided by operating activities is $84,000.

Explanation:

To arrive at the cash was provided by operating activities, we need to prepare an extract of statement of cash flows (operating activities) as follows:

Statement of cash flows (extract)

Net loss ($10,000)

Add: Depreciation $40,000

Decrease in accounts receivable $12,000

Decrease in inventories $35,000

Increase in accounts payable $8,000

Less: Increase in prepaid expenses $1,000

Net cash flows from operating activities $84,000

Note that the purchase of treasury stock of $50,000 belongs to cash flows from financing activities.