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8 September, 16:45

A company's income statement showed the following: net income, $126,000; depreciation expense, $36,000; and gain on sale of plant assets, $10,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $10,600; merchandise inventory increased $24,000; prepaid expenses increased $7,400; accounts payable increased $4,600. Calculate the net cash provided or used by operating activities.

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  1. 8 September, 19:12
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    Answer: $135,800

    Explanation: cash flow from operating activities can be calculated using following equation : -

    = Net income + depreciation - gain on sale of equipment + decrease in receivables - increase in inventory - increase in prepaid expenses + increase in accounts payable

    = $126,000 + $36,000 - $10,000 + $10,600 - $24,000 - $7,400 + $4,600

    = $135,800
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