Question

Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $252,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is

A) $252,000
B) $242,000
C) $262,000
D) $332,000

Answer 1

The cash flows from operating activities to be reported on the statement of cash flows is $262,000.

Step-by-step explanation:

The cash flows from operating activities to be reported on the statement of cash flows can be calculated using the indirect method. This method starts with net income and adjusts for non-cash expenses and changes in working capital accounts. In this case, we can use the following formula:

Cash flows from operating activities = Net income + Non-cash expenses - Changes in working capital

Net income: $252,000
Non-cash expenses: Depreciation, amortization, etc. (not provided in the question)
Changes in working capital = Change in accounts receivable = Ending accounts receivable - Beginning accounts receivable = $70,000 - $80,000 = -$10,000

Therefore, the cash flows from operating activities to be reported on the statement of cash flows is $252,000 + Non-cash expenses - (-$10,000) = $262,000