Earned net income of $65,000 after deducting depreciation of $8,000 and all other expenses. Current assets decreased by $7,000 , and current liabilities increased by $9,000. How much was Salem Nursery's cash provided by operating activities (indirect method) ?

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Business

Gizmo

17 March, 03:46

Earned net income of $65,000 after deducting depreciation of $8,000 and all other expenses. Current assets decreased by $7,000 , and current liabilities increased by $9,000. How much was Salem Nursery's cash provided by operating activities (indirect method) ?

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Lucia Ho · Answer 1

Cash provided by operating activities is 89.000

Explanation:

The indirect method involves the adjustment of net income with changes in balance sheet accounts to arrive at the amount of cash generated by operating activities.

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 (-)

Notice the amounts of any decreases are in parentheses.

Net income 65.000

Adjustment to reconcile the net income to cash

+ Depreciation expense 8.000

+ Current assets decrease 7.000

+ Current liabilities increase 9.000

Net cash 89.000