Question

Adama Company reported a net loss of $6,000 for the year ended December 31, 2014. During the year, accounts receivable increased $15,000, merchandise inventory decreased $12,000, accounts payable decreased by $20,000, and depreciation expense of $12,000 was recorded. During 2014, operating activities:
a.used net cash of $17,000.
b.used net cash of $29,000.
c.provided net cash of $24,000.
d.provided net cash of $21,000.

Answer 1

Answer:

a.used net cash of $17,000.

Explanation:

The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net loss -$6,000

Adjustment made:

Add : Depreciation expense $12,000

Less: Increase in accounts receivable -$15,000

Add: Decrease in merchandise inventory $12,000

Less: Decrease in accounts payable -$20,000

Total of Adjustments -$11,000

Net Cash flow from Operating activities                               -$17,000