Question

Accounts receivable arising from sales to customers amounted to $120,000 and $51,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $214,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows isa. $265,000b. $283,000c. $214,000d. $145,000

Answer 1

b. $283,000

Step-by-step explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.

So, the calculations are shown below:

Cash flow from Operating activities

Net income $214,000

Add: Decrease in accounts receivable $69,000 ($120,000 - $51,000)

Net Cash flow from Operating activities $283,000