Question

Accounts receivable from sales transactions were $47,732 at the beginning of the year and $64,117 at the end of the year. Net income reported on the income statement for the year was $147,991. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is Select the correct answer. $147,991 $164,376 $131,606 $16,385

Answer 1

Answer:

The correct answer is $131,606

Explanation:

The indirect method involves the adjustment of net income with changes in balance sheet accounts to arrive at the amount of cash generated by operating activities.

First,  we must get the difference (change) in Accounts receivable from sales transactions

At the beginning of the year $47,732

At the end of the year $64,117

Increase of Accounts receivable $16385

It depends on the account if it is added or subtracted to net income. An Increase of Accounts receivable will be subtracted from net income.

Net income $147,991

Increase of Accounts receivable $-16385

Net cash $131,606