Question

Below is the income statement for Sun Devil Company for the year ending December 31, 20x2: Sales (net) $500,000 Cost of Goods Sold: Beginning Inventory $ 50,000 Purchases 300,000 Goods Available for Sale 350,000 Ending Inventory 40.000 Cost of Goods Sold 310,000 Gross Profit $190.000 Operating Expenses: Wages $35,000 Depreciation 30,000 Advertising 15,000Administrative 5.000 $85,000$105,000 Income from Operations Gain on Sale of Equipment 50.000 Net Income $155 000 The following balances were derived from the balance sheet: December 31 20x2 20x1 Accounts Receivable $100,000 $ 90,000Accounts Payable 30.000 50.000 Prepaid Advertising Expense 5,000 3,000Wages Payable 5,000 4,000 Determine Cash Flows from Operating Activities: a. $164,000 b. $104,000 c. $114,000 d. $94,000

Answer 1

Answer:

The Cash Flows from Operating Activities is $104,000. The right answer is b.

Explanation:

According to the given data, the cash flows from operating activities would be the following:

Sun Devil Company

Statement of cash flow(Partial)

For the year ended December 31,20x2

Operating Activities:

Net income  $155,000

Adjust to reconcile net income to

Net cash provided (used)by operating Activities:

Depreciation Expense  $30,000

Gain on sale of Equipment -$50000

Account Receivable Increase -$10000

Prepaid Expense Increase -$2000

Wages Payable Increase $1000

Account Payable Decrease -$20000

Total Adjust to reconcile net income to

Net cash provided (used)by operating Activities=  -$51000

Therefore, Net cash provided by operating Activities  $104,000