Question

The Hamada Company sales for 2018 totaled $150,000 and purchases totaled $95,000. Selected January 1, 2018, balances were: accounts receivable, $18,000; inventory, $14,000; and accounts payable, $12,000. December 31, 2018, balances were: accounts receivable, $16,000; inventory, $15,000; and accounts payable, $13,000.

Net cash flows from these activities were:(A) $55,000.
(B) $74,000.
(C) $45,000.
(D) $58,000.

Answer 1

The net cash flows from these activities were -$2,000.

Step-by-step explanation:

The net cash flows from these activities can be calculated by comparing the changes in accounts receivable, inventory, and accounts payable.

1. Start with the beginning balances:

• Accounts receivable: $18,000
• Inventory: $14,000
• Accounts payable: $12,000

2. Calculate the changes from beginning to ending balances:

• Change in accounts receivable: $16,000 - $18,000 = -$2,000
• Change in inventory: $15,000 - $14,000 = $1,000
• Change in accounts payable: $13,000 - $12,000 = $1,000

3. Calculate the net cash flows from these activities:

• Net cash flows = Change in accounts receivable + Change in inventory - Change in accounts payable
• Net cash flows = (-$2,000) + $1,000 - $1,000 = -$2,000 + $1,000 - $1,000 = -$2,000

The net cash flows from these activities were (A) -$2,000.

Answer 2

Option (D) is correct.

Step-by-step explanation:

Cash collections:

= Sales + Decrease in accounts receivable

= $150,000 + ($18,000 - $16,000)

= $150,000 + $2,000

= $152,000

Cash disbursements:

= Purchase - Increase in Accounts payable

= $95,000 - (13,000 - 12,000)

= $95,000 - $1,000

= $94,000

Therefore,

Net cash flows:

= Cash collections - Cash disbursements

= $152,000 - 94,000

= $58,000