Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $203,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is
A) $203,000.
B) $208,000.
C) $238,000.
D) $198,000.

Question

Quizplus · Accepted Answer

The increase in accounts receivable of $5,000 ($40,000 - $35,000) indicates that not all sales were collected in cash. Therefore, the cash flow from operating activities is $203,000 (income) - $5,000 (increase in receivables) = $198,000.

Accounts Receivable Arising from Sales to Customers Amounted to $35,000