Baxter Company reported a net loss of $13,000 for the year ended December 31. During the year, accounts receivable decreased by $5,000, merchandise inventory increased by $8,000, accounts payable increased by $10,000, and depreciation expense of $4,000 was recorded. During the year, operating activities; a. used net cash of $2,000b. provided net cash of $8,000c. provided net cash of $2,000d. used net cash of $8,000

Question

Business

Pranav Pittman

27 December, 08:50

Baxter Company reported a net loss of $13,000 for the year ended December 31. During the year, accounts receivable decreased by $5,000, merchandise inventory increased by $8,000, accounts payable increased by $10,000, and depreciation expense of $4,000 was recorded. During the year, operating activities; a. used net cash of $2,000b. provided net cash of $8,000c. provided net cash of $2,000d. used net cash of $8,000

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Jazlene Blankenship · Answer 1

a. used net cash of $2,000

Explanation:

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

Cash flow from Operating activities - Indirect method

Net loss - $13,000

Adjustment made:

Add : Depreciation expense $4,000

Add: Decrease in accounts receivable $5,000

Less: Increase in inventory - $8,000

Add: Increase in accounts payable $10,000

Total of Adjustments $11,000

Net Cash flow from Operating activities - $2,000