Question

Nevada Boot Co. reported net income of $217,000 for its year ended December 31, 2021. Purchases totaled $152,900. Accounts payable balances at the beginning and end of the year were $36,600 and $32,100, respectively. Beginning and ending inventory balances were $43,100 and $46,300, respectively.

Assuming that all relevant information has been presented, Nevada Boot would report operating cash flows of:

Answer 1

Answer:

The answer is $209,300

Explanation:

This is an indirect method of preparing cash flow. Why? - Because indirect method of preparing cash flow start with net income under cash flow for operating activities section.

Account payable decrease over the year($36,600 - $32,100)

=$4,500

Inventory balance increase over the year($46,300 - $43,100)

=$3,200

Therefore, Nevada Boot would report operating cash flows of:

Net income....................................$217,000

Less:

Increase in inventory......... ($3,200)

Decrease in accounts payable.................................. ($4,500)

Cash flow from operating activities...............................$209,300