How to Calculate Cash Provided by Operating Activities

Question:

What is the formula to calculate the cash provided by operating activities based on the given data?

Answer:

The formula to calculate the cash provided by operating activities is as follows:

Cash provided by operating activities = Net Income + Depreciation Expense - Increase in Accounts Receivable - Increase in Inventory + Decrease in Prepaid Expenses - Decrease in Accounts Payable

To calculate the cash provided by operating activities, we need to consider the net income, depreciation expense, and changes in working capital accounts such as Accounts Receivable, Inventory, Prepaid Expenses, and Accounts Payable.

In the given data, the net income is $210,800 and the depreciation expense is $26,500. Accounts Receivable increased by $16,700, Inventory increased by $42,000, Prepaid Expenses decreased by $4,800, and Accounts Payable decreased by $5,600.

By applying the formula and considering these changes in working capital, we can determine that the cash provided by operating activities is $167,200.