Question

Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $10,000 of common stock to stockholders. Provided $6,300 of services on account. Paid $2,600 cash for operating expenses. Collected $3,900 of cash from accounts receivable. Paid a $300 cash dividend to stockholders. The amount of net cash flow from operating activities shown on Nelson Company's Year 1 statement of cash flows is:

Answer 1

Answer:

$1,300

Explanation:

Net Cash Flow from Operating Activities represents the cash generated or used in regular business transactions of company, which are not investing or finance transactions.

Here, in the given instance:

Issue of stock is a financing transaction.

Providing services on account is not a cash transaction and will not be reported.

Paying cash is an operating expense, as paid for operating transaction = $2,600

Collecting cash from accounts receivables is operating transaction = $3,900

Payment of dividend is financing activity.

Thus, net cash generated from operating activities = $3,900 - $2,600 = $1,300