Question

Innovative Products reported net income of $219,000. Beginning and ending inventory balances were $44,500 and $46,500, respectively. Accounts Payable balances at the beginning and end of the year were $40,500 and $37,000, respectively. Assuming that all relevant information has been presented, the company would report net operating cash flows of:

Answer 1

Answer:

$213,500

Explanation:

Given the information above, first, we'll determine increase in inventory

Increase inventory = Ending inventory - Beginning inventory

Increase inventory = $46,500 - $44,500

Increase inventory = $2,000

We will also calculate decrease in account payable

Decrease in accounts payable = Beginning accounts payable - Ending accounts payable

Decrease in accounts payable = $40,500 - $37,000

Decrease in accounts payable = $3,500

Therefore,

Net operating cash flows = Net income - Increase inventory - Decrease in accounts payable

Net operating cash flows = $219,000 - $2,000 - $3,5000 = $213,500