Answer (C) is correct . The net income of $161,000 must be adjusted by noncash expenses (such as depreciation) and the amount of changes in current assets as follows: Net income $161,000 Depreciation expense 40,000 Increase in receivables (14,000) Increase in payables 10,500 Decrease in inventories 8,000 Net cash provided? $205,500
Answer (A) is incorrect because The amount of $165,000 results from a failure to add back depreciation -- a noncash expense.
Answer (B) is incorrect because The amount of $189,500 results from deducting the inventory change rather than adding it.
Answer (D) is incorrect because The amount of $212,500 results from reversing the treatment of receivables and payables.
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