The correct option is d.
To adjust net income for changes in operating assets and liabilities to arrive at net cash flow from operating activities, you need to calculate the changes in each of the relevant accounts from Year 1 to Year 2. Then, you will adjust the net income by adding or subtracting these changes. Here are the steps:
1. Calculate the changes in accounts receivable, inventory, accounts payable, and dividends payable:
- Change in Accounts Receivable: $17,500 (Year 2) - $12,500 (Year 1) = $5,000 increase
- Change in Inventory: $51,650 (Year 2) - $44,200 (Year 1) = $7,450 increase
- Change in Accounts Payable: $8,480 (Year 2) - $5,100 (Year 1) = $3,380 increase
- Change in Dividends Payable: $9,480 (Year 2) - $6,100 (Year 1) = $3,380 increase
2. Calculate the changes in operating assets and liabilities. In this case, we need to calculate the net change, which is the sum of the changes in accounts receivable and inventory minus the change in accounts payable and dividends payable:
- Net Change = (Change in Accounts Receivable + Change in Inventory) - (Change in Accounts Payable + Change in Dividends Payable)
- Net Change = ($5,000 + $7,450) - ($3,380 + $3,380)
- Net Change = $12,450 - $6,760
- Net Change = $5,690
3. Finally, adjust the net income by adding the net change in operating assets and liabilities:
- Net Cash Flow from Operating Activities = Net Income + Net Change in Operating Assets and Liabilities
- Net Cash Flow from Operating Activities = $75,800 (Net Income) + $5,690 (Net Change in Operating Assets and Liabilities)
Now, calculate the final answer:
Net Cash Flow from Operating Activities = $75,800 + $5,690 = $81,490
So, the answer is $81,490.
Huluduey Corporation’s comparative balance sheet for current assets and liabilities was as follows: (Table is given below)
Adjust net income of $75,800 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.
a) $80,530
b) $69,230
c) $71,030
d) $81,490