Use the Following Information and the Indirect Method to Calculate

question 138

Multiple Choice

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: $\begin{array}{|l|r|}\hline \text { Net income } & \$ 12,300 \\\hline \text { Depreciation expense } & 12,000 \\\hline \text { Payment on mortgage payable } & 15,000 \\\hline \text { Gain on sale of land } & 7,500 \\\hline \text { Increase in merchandise inventory } & 2,050 \\\hline \text { Increase in accounts payable } & 6,150 \\\hline \text { Proceeds from sale of land } & 8,000 \\\hline\end{array}$

• A)$12,700
• B)$13,900
• C)$20,900
• D)$28,400
• E)$35,900

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Definitions:

Deferral Method

An accounting practice that involves postponing the recognition of certain income or expenses until a later accounting period, typically to match revenue with expenses more effectively.

Donation Revenue

Income received from gifts or donations, often characterized by the absence of an expected return or direct benefit to the donor.

Restricted Contribution

Funds given to an organization with stipulations on their use, requiring the organization to apply them to a specified project or purpose.

Specific Project

A distinct endeavor with set objectives, timeline, and resources allocated for completion.