The following information is for Cleveland Company:
Additional data for 2016:
(1)Sales on account for the period were $80,000.
(2)Operating expenses for the period were $52,000.
Based on this limited information,what was the net cash inflow from operations?

A)$18,000.
B)$22,000.
C)$28,000.
D)$34,000.

Question

The following information is for Cleveland Company:
Additional data for 2016:
(1)Sales on account for the period were $80,000.
(2)Operating expenses for the period were $52,000.
Based on this limited information,what was the net cash inflow from operations?

A)$18,000. 
B)$22,000. 
C)$28,000. 
D)$34,000.

Quizplus · Accepted Answer

To determine the net cash inflow from operations, we need to start with net income and make adjustments for all non-cash expenses and changes in working capital. However, we do not have this information available. Therefore, we can use the indirect method to estimate the cash inflows and outflows from operations using the information provided.

Starting with net income, we add back all non-cash expenses, which in this case is $0 since we do not have any information about depreciation or amortization. Then, we subtract the increase in accounts receivable, which is $0 since we do not have any information about changes in accounts receivable. Finally, we add back the operating expenses, which were $52,000.

Net cash inflow from operations = Net income + Non-cash expenses - Increase in accounts receivable + Operating expenses
Net cash inflow from operations = $0 + $0 - $0 + $52,000
Net cash inflow from operations = $52,000

Therefore, the net cash inflow from operations for Cleveland Company is $34,000.

The Following Information Is for Cleveland Company