Old MacDonald's Farm had the following transactions during 2014: Issued par value common stock for cash of $46,000 Recorded and paid wages expense of $5,000 Acquired land by issuing common stock of $26,000 Declared and paid a cash dividend of $1,000 Sold a long-term investment for cash of $4,000 Recorded cash sales of $82,000 Purchased inventory for cash of $56,000 Acquired an investment in IBM stock for cash of $5,000 Converted bonds payable to common stock in the amount of $16,000 Repaid a 6 year note payable in the amount of $35,000 What is the net cash provided by operating activities?

$21,000

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.

As such, the net cash provided by operating activities

= -$5,000 + $82,000 - $56,000

= $21,000

Issued par value common stock for cash of $46,000 - Financing activity

Recorded and paid wages expense of $5,000 - Operating activity (an outflow)

Acquired land by issuing common stock of $26,000 - Investing and financing activity

Declared and paid a cash dividend of $1,000 - Financing

Sold a long-term investment for cash of $4,000 - Investing activity

Recorded cash sales of $82,000 - Operating activity (an inflow)

Purchased inventory for cash of $56,000 - Operating activity (an outflow)

Acquired an investment in IBM stock for cash of $5,000 - Investing activity

Converted bonds payable to common stock in the amount of $16,000 - Financing activity

Repaid a 6 year note payable in the amount of $35,000 - Financing activity

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answer; dividing net income by 1- t ;