Question

The Hamada Company sales for 2018 totaled $150,000 and purchases totaled $95,000. Selected January 1, 2018, balances were: accounts receivable, $18,000; inventory, $14,000; and accounts payable, $12,000. December 31, 2018, balances were: accounts receivable, $16,000; inventory, $15,000; and accounts payable, $13,000.

Net cash flows from these activities were:(A) $55,000.
(B) $74,000.
(C) $45,000.
(D) $58,000.

Answer 1

Answer:

Option (D) is correct.

Explanation:

Cash collections:

= Sales + Decrease in accounts receivable

= $150,000 + ($18,000 - $16,000)

= $150,000 + $2,000

= $152,000

Cash disbursements:

= Purchase - Increase in Accounts payable

= $95,000 - (13,000 - 12,000)

= $95,000 - $1,000

= $94,000

Therefore,

Net cash flows:

= Cash collections - Cash disbursements

= $152,000 - 94,000

= $58,000