Question

Emerald Company was established in January, Year 1. During Year 1 the company experienced the following events.

⋅ Collected 50,000 cash from the issue of common stock.
⋅ Borrowed 45,000 cash from the state bank.
⋅ Earned 120,000 of cash revenue.
⋅ Paid 180,000 cash expenses.

The company was liquidated at the end of Year 1. Based on this information, what is the net cash flow from operating activities for Year 1?
1) 50,000
2) 70,000
3) 100,000
4) 120,000

Answer 1

The net cash flow from operating activities for Year 1 is -$10,000.

Step-by-step explanation:

The net cash flow from operating activities for Year 1 can be calculated by subtracting the cash expenses from the cash revenue. In this case, the cash revenue is $120,000 and the cash expenses are $180,000, so the net cash flow from operating activities is -$60,000.

Since the company collected $50,000 cash from the issue of common stock, the net cash flow from operating activities for Year 1 would be -$60,000 + $50,000 = -$10,000.