Question

Using the information below, calculate net cash flows from operating activities: Net income $ 120,000 Receive cash from issuing stock 80,000 Pay cash for equipment 90,000 Increase in accounts receivable 10,000 Depreciation expense $ 30,000 Increase in accounts payable 5,000 Receive cash from sale of land 75,000 Pay cash dividends 20,000

Answer 1

To calculate net cash flows from operating activities, add the cash inflows and subtract the cash outflows. In this case, the net cash flows from operating activities is $100,000.

Step-by-step explanation:

To calculate net cash flows from operating activities, we need to consider the following:

• Net income: $120,000
• Receive cash from issuing stock: $80,000
• Pay cash for equipment: $90,000
• Increase in accounts receivable: $10,000
• Depreciation expense: $30,000
• Increase in accounts payable: $5,000
• Receive cash from sale of land: $75,000
• Pay cash dividends: $20,000

Step 1: Add the cash inflows and subtract the cash outflows:

• (Net income + Increase in accounts receivable + Increase in accounts payable + Receive cash from sale of land) - (Pay cash for equipment + Pay cash dividends) = Net cash flows from operating activities
• (120,000 + 10,000 + 5,000 + 75,000) - (90,000 + 20,000) = Net cash flows from operating activities
• Net cash flows from operating activities = $100,000

Therefore, the net cash flows from operating activities is $100,000.

Answer 2

Net Cash Flow from Operating Activities is $145,000

Step-by-step explanation:

Cash Flow from Operating Activities

Net Income $120,000

Adjustment for Non Cash Expenses

Deprecation Expense $30000

Working Capital Changes

Increase in Accounts Receivables $(10,000)

Increase in Accounts Payable $5000

Net Cash Flow from Operating Activities $145,000

Please note that:

• Proceeds from issue of stock and payment of cash dividends relates to Financing Activities of Cash Flow Statement
• Proceeds from sale of land and cash payment for purchase of equipment relates to Investing Activities of Cash Flow Statement

*figures in brackets represent negative values or cash outflows