Question

Hemmer Company reported net income for 2016 in the amount of $43,000. The company's financial statements also included the following:

Decrease in accounts receivable $5,800
Increase in inventory 1,900
Depreciation expense 2,700

What is net cash provided by operating activities?

A. $42,200.
B. $39,100.
C. $49,600.
D. $45,700.

Answer 1

Answer:

C. $49,600.

Explanation:

We can find the net cash provided by operating activities using the information given to us in the question. We will start from net income which is $43,000 and then add 5,800 to it because it is a current asset which is decreasing which means that the company received cash for it, then we will subtract 1,900 because it is an increase in inventory and we assume the company paid cash for it because there are no increase in accounts payable, and then we will add 2,700 because depreciation is a non cash expense, therefore we will add it back when we calculate the cash provided by operating activities.

43,000+ 5,800-1,900+2,700=49,600