Question

Karr, Inc., reported net income of $300,000 for 2017. Changes occurred in several balance sheet accounts as follows:
Equipment $25,000 increase
Inventories $20,000 decrease
Accumulated depreciation 40,000 increase
Accounts receivable 15,000 increase
Note payable 30,000 increase
Accounts payable 5,000 decrease
Additional information:
* During the current year, Karr sold equipment costing $25,000, with accumulated depreciation of
$12,000, for a gain of $5,000.
* In December of the current year, Karr purchased equipment costing $50,000 with $20,000 cash
and a 12% note payable of $30,000.
* Depreciation expense for the year was $52,000.
1. In Karr's current-year statement of cash flows, calculate the net cash provided by operating activities.
2. In Karr's current-year statement of cash flows, calculate the net cash used in investing activities.

Answer 1

Answer and Explanation:

The computation is shown below:

1. The net cash provided by operating activities is

Net income    $300,000

Adjustments made

Add: Depreciation expense $52,000

Add: Decrease in inventory $20,000

Less: Increase in account receivable -$15,000

Less: Decrease in account payable -$5,000

Less: Gain on sale of equipment -$5,000

Cash flow from operations $347,000

2. The net cash flow from investing activities is

Sales of an equipment $18,000

Purchase of an equipment -$20,000

Cash flow from investing -$2,000