Question

Bird Brain Co. reported net income of $46,400 for the year ended December 31, 2021. January 1 balances in accounts receivable and accounts payable were $23,300 and $24,400, respectively. Year-end balances in these accounts were $21,200 and $29,700, respectively. Assuming that all relevant information has been presented, Bird Brain's cash flows from operating activities would be:

$41,300
$49,500
$54,100
$36,200

Answer 1

The cash flows from operating activities for Bird Brain Co. would be $43,200.

Step-by-step explanation:

To calculate the cash flows from operating activities, we need to consider the changes in accounts receivable and accounts payable. The change in accounts receivable is the January 1 balance minus the year-end balance, which is $23,300 - $21,200 = $2,100. The change in accounts payable is the year-end balance minus the January 1 balance, which is $29,700 - $24,400 = $5,300.

Next, we need to calculate the cash flows from operating activities using the indirect method. We start with net income of $46,400 and add back any non-cash expenses, such as depreciation, and subtract any non-cash revenues or gains. In this case, let's assume there are no non-cash items, so we don't need to make any adjustments.

Finally, we adjust for the changes in accounts receivable and accounts payable. Since accounts receivable decreased by $2,100, we add this amount to net income. Since accounts payable increased by $5,300, we subtract this amount from net income.

Therefore, the cash flows from operating activities would be:

Net income + Increase in accounts receivable - Decrease in accounts payable

= $46,400 + $2,100 - $5,300

= $43,200.