Hobby Gas Station earned net income of $ 64,000 after deducting depreciation of $ 4,000 and all other expenses. Current assets decreased by $ 3,000 , and current liabilities increased by $ 6,000. How much was Hobby Gas Station's cash provided by operating activities (indirect method) ?

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Business

Lang

4 August, 22:19

Hobby Gas Station earned net income of $ 64,000 after deducting depreciation of $ 4,000 and all other expenses. Current assets decreased by $ 3,000 , and current liabilities increased by $ 6,000. How much was Hobby Gas Station's cash provided by operating activities (indirect method) ?

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Vaughan · Answer 1

cash provided from operating activities 77,000

Explanation:

net income 64,000

non-monetary term

depreciation 4,000 (1)

adjusted net income 68,000

changes in working capital

decrease in assets 3.000 (2)

increase in liabilities 6,000 (3)

total change 9,000

cash provided from operating activities 77,000

Notes:

(1) The depreciation doesn't involve cash, so it should be remove from the calculations

(2) the decrease in assets refers to less inventory or account receivable, among other assets. This means assets were converted to cash. Increasing Cash

(3) the increase in current liabilities represent that cash disbursement were delayed. The cash was increased because it wasn't used to pay this liabilities.