Question

Line Item Description Amount

Accounts Receivable, January 1 $14,955
Accounts Receivable, December 31 $8,337
Accounts Payable, January 1 $4,244
Accounts Payable, December 31 $9,723
Inventory, January 1 $10,297
Inventory, December 31 $15,890
Sales $74,633
Cost of Goods Sold $31,762
Washington Company uses the direct method to report cash flows from (used for) operating activities. Assume that all accounts payable are owed to merchandise suppliers.
A) Net cash flow from operating activities is an inflow.
B) Net cash flow from operating activities is an outflow.
C) Accounts receivable increased during the period.
D) Accounts payable decreased during the period.

Answer 1

Net cash flow from operating activities is an outflow. Accounts receivable increased during the period. Accounts payable decreased during the period.

Step-by-step explanation:

To determine whether net cash flow from operating activities is an inflow or an outflow, we need to analyze the changes in accounts receivable and accounts payable. Accounts Receivable increased from $14,955 to $8,337, indicating a decrease in cash flow from customers. This means that net cash flow from operating activities is an outflow. Accounts Payable increased from $4,244 to $9,723, indicating an increase in cash flow towards suppliers. This means that accounts payable decreased during the period.

Therefore, with a decrease in accounts receivable and an increase in accounts payable resulting in inflows, and the increase in inventory being an outflow, the final answer is that the net cash flow from operating activities is an inflow (Option A). Accounts receivable did not increase; rather, they decreased (Option C is incorrect), and accounts payable increased, not decreased (Option D is incorrect).