Question

Sunset Acres reported net income of $60 million. Included in that number were trademark amortization expense of $2 million and a gain on the sale of land of $1 million. Records reveal decreases in accounts receivable, accounts payable, and inventory of $2 million, $5 million, and $4 million, respectively. What were Sunset’s cash flows from operating activities? (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1

$62 million

Step-by-step explanation:

Adjustments for non-cash effects:

= Amortization expense - Gain on the sale of land

= $2 million - $1 million

= $1 million

Changes in operating assets and liabilities:

= Decrease in accounts receivable - Decrease in accounts payable + Decrease in inventory

= $2 million - $5 million + $4 million

= $1 million

Net cash flows from operating activities:

= Net income + Adjustments for non-cash effects + Changes in operating assets and liabilities

= $60 million + $1 million + $1 million

= $62 million