Question

Accounts receivable from sales transactions were $51,000 at the beginning of the year and $64,000 at the end of the year. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is
a. $118,000
b. $105,000
c. $169,000
d. $92,000

Answer 1

Answer:

$92,000

Explanation:

It is given that accounts receivable in beginning is $51,000 and $64,000 at the end of the year. Increase in accounts receivable is calculated by deducting closing balance from opening balance. Therefore, increase in accounts receivable is $13,000.

It is calculated that increase in accounts receivable is $13,000. Net income for the year was $105,000. Cash flow from operating activities can be calculated by deducting increase in accounts receivable from net income. Therefore, Cash flow from operating activities is $92,000.