US CMA Part 1 · Chapter 1 · Question 3 of 23
Kestrel Corp reported net income of $480,000 for the year. Other information: Depreciation expense: $95,000 Increase in accounts receivable: $40,000 Decrease in inventory: $22,000 Decrease in accounts payable: $18,000 Gain on sale of equipment: $12,000 Using the indirect method, what is net cash provided by operating activities?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $527,000
Explanation
Start with net income $480,000, add back non-cash depreciation $95,000, deduct the increase in receivables $40,000, add the decrease in inventory $22,000, deduct the decrease in payables $18,000 and deduct the gain on sale $12,000 (the full proceeds are an investing inflow). Operating cash flow = $527,000.
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