The balance sheet of Storage Solutions reports total assets of $300,000 and $350,000 at the beginning and end of the year,respectively.The cash return on assets for the year is 10%.What is Storage Solutions' net cash flows from operating activities for the year?
A) $25,000.
B) $30,000.
C) $32,500.
D) $35,000.

Question

The balance sheet of Storage Solutions reports total assets of $300,000 and $350,000 at the beginning and end of the year,respectively.The cash return on assets for the year is 10%.What is Storage Solutions' net cash flows from operating activities for the year?
A)	$25,000.
B)	$30,000.
C)	$32,500.
D)	$35,000.

Quizplus · Accepted Answer

The formula for cash return on assets is:
Cash return on assets = Net cash flows from operating activities / Average total assets
where Average total assets = (Beginning total assets + Ending total assets) / 2

Rearranging the formula we can find the net cash flows from operating activities:
Net cash flows from operating activities = Cash return on assets x Average total assets
Average total assets = ($300,000 + $350,000) / 2 = $325,000
Cash return on assets = 10% = 0.1

So, 
Net cash flows from operating activities = 0.1 x $325,000 = $32,500

Therefore, the correct answer is C, $32,500.

The Balance Sheet of Storage Solutions Reports Total Assets of $300,000