Question

Accounts receivable arising from trade transactions amounted to $62,000 and $78,000 at the beginning and end of the year, respectively Net income reported on the income statement for the year was $125,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method are________ Setect one:
a. $140,000
b. $109,000.
c. $141,000.
d. $125,000.

Answer 1

Answer: b. $ 109,000.

Explanation:

Cash flow after extraordinary effects: US $ 125,000

Use of funds in accounts receivable: (US$ 78,000- US$ 62,000) = US$ 16,000

Cash flow from operating activities = 109,000

The variation of accounts receivable is subtracted, because they have not collected accounts receivable, which represents a decrease in cash.