Question

Accounts receivable arising from sales to customers amounted to $80,000 and $65,000 at the beginning and end of the year respectively. Net income reported on the income statement for the year was $150,000. Exclusive of the effect of other adjustments, the cash inflows from operating activities to be reported on the statement of cash flows are: a.$259,000. b.$200,000. c.$120,000. d.$165,000.

Answer 1

Answer:

d. $165,000

Explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.  

The computation is shown below:

Cash flow from Operating activities  

Net income                   $150,000

Add: Decrease in accounts receivable $15,000      ($65,000 - $80,000)

Net Cash flow from Operating activities           $165,000