During 2020 the Ivanhoe Company had a net income of $85700. In addition, selected accounts showed the following changes: Accounts Receivable $3100 increase Accounts Payable 1200 increase Buildings 4000 decrease Depreciation Expense 1600 increase Bonds Payable 8100 increase What was the amount of cash provided by operating activities? $87300. $85700. $85400. $95700.

$85,400

Explanation:

The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.

The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.  

The sale of assets, interest received, purchase of investments are examples of investing activities while the issuance of stocks, debt principal deduction (loan settlement), issuance of debt securities etc are examples of financing activities.

Accounts Receivable $3100 increase - Operating cash outflow

Accounts Payable 1200 increase - Operating cash inflow

Buildings 4000 decrease -  Investing

Depreciation Expense 1600 increase - Operating cash inflow  

Bonds Payable 8100 increase - Financing cash inflow

Amount of cash provided by operating activities

= -$3100 + $1200 + $1600 + $85700

= $85,400

a corporation is legally separate from its owner, and it pays its own taxes.

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