Question

Accounts receivable resulting from sales to customers amounted to $40,000 and $31,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is

Answer 1

Answer: The answer is $129,000.

Explanation: The $129,000 amount above was derived by adding the movement in account receivable to the income reported on the income statement for the year. Since there are no effects of other adjustments, cash flows from operating activities would be, income $120,000 plus movement in account receivable ($31,000 - 40,000) = $9,000, giving rise to $129,000. Since account receivable decreased, it means there was an inflow of cash.