Scranton, Inc. reports net income of $238,000 for the year ended December 31. It also reports $91,200 depreciation expense and a $5,400 gain on the sale of equipment. Its comparative balance sheet reveals a $37,100 decrease in accounts receivable, a $16,550 increase in accounts payable, and a $13,050 decrease in wages payable. Calculate the cash provided (used) in operating activities using the indirect method.

Question

Ronnie Knapp

Business

27 May, 05:54

Scranton, Inc. reports net income of $238,000 for the year ended December 31. It also reports $91,200 depreciation expense and a $5,400 gain on the sale of equipment. Its comparative balance sheet reveals a $37,100 decrease in accounts receivable, a $16,550 increase in accounts payable, and a $13,050 decrease in wages payable. Calculate the cash provided (used) in operating activities using the indirect method.

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Baylee Small · Answer 1

The Net cash is 364.400

Explanation:

To get net cash flow using the indirect method we must make adjustments to the net income.

It depends on the account if it is added or subtracted to net income. Below you will find the added account with a plus (+) and the subtracted ones with a minus (-)

In this case,

Net income 238.000

Adjustment to reconcile the net income to cash

plus (+) Depreciation expense 91.200

minus (-) Gain on sale of equipment (5.400)

plus (+) decrease in accounts receivable 37.100

plus (+) Accounts payable increase 16.550

minus (-) Wages payable decrease (13.050)

Net cash 364.400