ExpertHard1 markMultiple Choice
CPA · Question 49 · Area III: State & Local Governments
A City's Water Enterprise Fund reports the following cash flows:<br/>- Cash received from customers: $500,000<br/>- Cash paid to suppliers: $200,000<br/>- Cash paid for interest on bonds: $50,000<br/>- Cash paid for new equipment: $100,000<br/><br/>What is the Net Cash Provided by Operating Activities?
A City's Water Enterprise Fund reports the following cash flows:<br/>- Cash received from customers: $500,000<br/>- Cash paid to suppliers: $200,000<br/>- Cash paid for interest on bonds: $50,000<br/>- Cash paid for new equipment: $100,000<br/><br/>What is the Net Cash Provided by Operating Activities?
Answer options:
A.
$150,000
B.
$250,000
C.
$300,000
D.
$200,000
How to approach this question
GASB Cash Flow Rules differ from FASB. Operating = Day-to-day exchange. Interest Paid/Received = Financing/Investing (NOT Operating). Capital Asset purchase = Capital Financing.
Full Answer
C.$300,000✓ Correct
C
Operating activities include receipts from customers and payments to suppliers/employees. Interest paid is classified as Capital and Related Financing (if debt is for capital assets) or Noncapital Financing. It is NOT operating.
Common mistakes
Applying FASB rules (where interest is operating).
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