Question

Nevada Boot Co. reported net income of $217,100 for its year ended December 31, 2021. Purchases totaled $152,000. Accounts payable balances at the beginning and end of the year were $37,600 and $31,400, respectively. Beginning and ending inventory balances were $42,800 and $46,400, respectively. Assuming that all relevant information has been presented, Nevada Boot would report operating cash flows of:

Answer 1

Answer:

operating cash flow 207,300

Explanation:

We will solve using indirect method:

from the net income we adjust for the change in the working capital:

net income        217,100

change in working capital:

decrease in account payable   (6,200)

Because the account payable decrease more cahs was used to pay up the bill

increase in inventory                 (3,600)

As inventory increase, more cash was used to purchase inventory

operating cash flow                 207,300

The purchase value could help us to get the amount of cash paid to suppliers, but we cannot figure out the sales collected or any other payment. We canot use direct method