Tracy company reports the following in its statement of cash flows:
Net Income $1,000 -
Depreciation and Amortization 350
Decrease (Increase) in Accounts receivable (10)
Decrease (increase) in inventory 200
Decrease (increase) in prepaid expenses 80
Increase (decrease) in trade payables (300)
Increase (decrease) in taxes payable 75
Cash Flow from operations 1,395 -
If Tracy shows depreciation expense of $275 in its income statement, cash paid for amortization is ________.
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A. B. C. D.Explanation
No cash outflow.
To determine the cash paid for amortization, we need to analyze the given information.
The statement of cash flows provided includes the following relevant items:
We can use the indirect method to calculate the cash paid for amortization. The indirect method starts with net income and makes adjustments to convert it from an accrual basis to a cash basis.
The formula for the indirect method is as follows:
Net Income
Substituting the given values, we have:
$1,000 + $350 + (-$10) + $200 + $80 + (-$300) + $75 = $1,395
Now, let's solve for the unknown variable, the cash paid for amortization (denoted as X).
$1,000 + $350 - $10 + $200 + $80 - $300 + $75 = $1,395
Simplifying the equation:
$1,395 + X = $1,395
X = $1,395 - $1,395 X = $0
Therefore, the cash paid for amortization is $0 (Option D).