Question

Nevada Boot Co. reported net income of $217,400 for its year ended December 31, 2018. Purchases totaled $152,800. Accounts payable balances at the beginning and end of the year were $36,900 and $31,200, respectively. Beginning and ending inventory balances were $43,300 and $47,000, respectively. Assuming that all relevant information has been presented, Nevada Boot would report operating cash flows of:

Answer 1

Operating cash flows = $208,000

Step-by-step explanation:

we know here that

accounts payable balance has decreased from $36,900 and $31,200

inventory balance has increased from $43,300 and $47,000

so to find out the operating cash flow any decrease in current liabilities and any increase in current assets should be subtracted from net income

so

accounts payable= current liability

and inventory = current asset

and

The operating cash flows to be reported should be computed as

Operating cash flows = Net income - Decrease in accounts payable balances - Increase in inventory balance ....................1

Operating cash flows =

Operating cash flows = $217,400 - ($36,900 - $31,200) - ($47,000 - $43,300)

Operating cash flows = $208,000