Question

A company's 2019 financial records included the following: Jan. 1, 2019 Dec. 31, 2019 Accounts Receivable $100,000 $80,000 Inventory $50,000 $70,000 Prepaid Expenses $100,000 $75,000 Accounts Payable $100,000 $110,000 Deferred Revenue $85,000 $70,000 The company's net income on its 2019 income statement is $155,000. Depreciation expense for 2019 is $25,000. What amount would the company report as net cash from operating activities for 2019

Answer 1

Answer:

The amount of net cash from operating activities for 2019 is $210,000.

Explanation:

Cash flows from operating activities refers to the section of the statement of cash flow that reveal the sources and utilization of cash got from ongoing normal business activities of a company in particular period.

Items that usually found under cash flows from operating activities are net income from the income statement, adjustments to reconcile net income, and changes in working capital.

The amount of net cash from operating activities for 2019 can be determined by preparing a statement of cash flow for operating activities only as follows:

                       Statement of cash flows

              (Operating activities section only)

                       For the year ended 2019

Details                                                                Amount ($)  

Net income                                                         155,000

Adjustment to reconcile net income:

Depreciation expense                                         25,000

Changes in working capital:

(Increase) decrease in current assets

Accounts Receivable ($80,000 - $100,000)      20,000

Inventory ($70,000 - $50,000)                          (20,000)

Prepaid Expenses ($75,000 - $100,000)           25,000

Increase (decrease) in current liabilities

Accounts Payable ($110,000 - $100,000)           10,000

Deferred Revenue ($70,000 - $85,000)          (15,000)  

Net cash from operating activities                  210,000