Question

Selected data for Kris Corporation’s comparative balance sheets for Year 1 and Year 2 are as follows:

Year 1 Year 2
Assets
Cash $100,000 $(50,000 )
Accounts receivable (net) 50,000 100,000
Inventory 100,000 250,000
Equipment (net) 300,000 350,000
Total assets $550,000 $650,000
Liabilities and Equity Accounts payable $150,000 $100,000
Income taxes payable 80,000 30,000
Bonds payable 100,000 80,000
Common stock 100,000 200,000
Retained earnings 120,000 240,000
Total liabilities and Equity $550,000 $650,000

Using the indirect method to create the operating activities section of the statement of cash flows, the cash flow from accounts receivable would be recorded as:__________

a. a decrease of $50,000 under investing activities.
b. an increase of $50,000 under investing activities.
c. a decrease of $150,000 under investing activities.
d. an increase of $150,000 under operating activities.

Answer 1

Correct option : c. a decrease of $150,000

Step-by-step explanation:

Based on the information given in Year 1 inventory shows the amount of $100,000 while the inventory in Year 2 shows the amount of $250,000 which simply means that inventory that is purchased is higher than the inventory that is sold which will inturn lead to outflow of cash because cash is been paid , hence cash will decreased by the amount of $150,000($100,000-$250,000).

Therefore the cash flow from accounts receivable would be recorded as:a decrease of $150,000