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 net cash flows from operating activities to be reported on the statement of cash flows using the indirect method is
A) $120,000
B) $129,000
C) $151,000
D) $111,000

Question

Quizplus · Accepted Answer

The net cash flows from operating activities can be calculated by starting with the income reported on the income statement ($120,000) and adjusting it for the change in accounts receivable. The accounts receivable decreased from $40,000 at the beginning of the year to $31,000 at the end of the year, which means that $9,000 more cash was collected than was recognized as income. Therefore, the net cash flows from operating activities is $120,000 + $9,000 = $129,000.

Accounts Receivable Resulting from Sales to Customers Amounted to $40,000