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20 July, 10:31

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.

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  1. 20 July, 12:47
    0
    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
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