Question

Laser World's income statement reported total revenues of $850,000 and total expenses (including $40,000 depreciation) of $720,000. The balance sheet reported the following: Accounts Receivable—beginning balance, $50,000 and ending balance, $60,000; Accounts Payable—beginning balance, $22,000 and ending balance, $28,000. Therefore, based only on this information, the net cash flows from operating activities were:

Answer 1

The net cash flows from operating activities were $166,000

Step-by-step explanation:

For computing the cash flow from operating activities, first, we need to find out the net income as it is not given in the question

So, the net income would equal to

= Total revenues - total expenses

= $850,000 - $720,000

= $130,000

The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net income $130,000

Adjustment made:

Add : Depreciation expense $40,000

Less: Increase in accounts receivable $10,000 ($60,000 - $50,000)

Add: Increase in accounts payable $6,000 ($28,000 - $22,000)

Net Cash flow from Operating activities $166,000