Asked by Kennedy McCarthy on Jul 21, 2024
Verified
Accounts receivable arising from sales to customers amounted to $86000 and $77000 at the beginning and end of the year respectively. Income reported on the income statement for the year was $290000. Exclusive of the effect of other adjustments the cash flows from operating activities to be reported on the statement of cash flows is
A) $290000.
B) $299000.
C) $213000.
D) $280000.
Operating Activities
Transactions related to the primary, day-to-day business operations, such as the sale of goods and services.
Accounts Receivable
The money owed to a company by its customers for goods or services delivered on credit but not yet paid for.
Income Statement
A financial statement that reports a company's financial performance over a specific accounting period, detailing revenue and expenses to show net income or loss.
- Gauge the net cash balance from activities within operations, investing, and financial domains.
- Discern the direct and indirect frameworks for computing cash flows from operating activities.
- Perceive the implications of changes in accounts receivable, inventory, and accounts payable on cash flow.
Verified Answer
MD
Mohamed DahchehJul 25, 2024
Final Answer :
B
Explanation :
The correct cash flow from operating activities is calculated by adjusting the income reported on the income statement for the change in accounts receivable. The decrease in accounts receivable ($86000 - $77000 = $9000) indicates that more cash was received than the income reported. Therefore, add this decrease to the reported income: $290000 + $9000 = $299000.
Learning Objectives
- Gauge the net cash balance from activities within operations, investing, and financial domains.
- Discern the direct and indirect frameworks for computing cash flows from operating activities.
- Perceive the implications of changes in accounts receivable, inventory, and accounts payable on cash flow.