Travis Company reported a profit for 20B of $20,000, building depreciation expense of $6,000, and amortization expense (patent) of $5,000. Also, trade payables increased by
$7,000 and inventory decreased by $2,000. What was the amount of "cash flows from operating activities" for 20B?
A) $40,000.
B) $36,000.
C) $34,000.
D) $35,000.

Question

Quizplus · Accepted Answer

The cash flows from operating activities are calculated by adjusting the net profit with non-cash expenses and changes in working capital. Starting with a profit of $20,000, add back non-cash expenses: $6,000 (depreciation) and $5,000 (amortization). Adjust for changes in working capital: add $7,000 (increase in trade payables) and $2,000 (decrease in inventory). Total cash flow from operating activities = $20,000 + $6,000 + $5,000 + $7,000 + $2,000 = $40,000.

Travis Company Reported a Profit for 20B of $20,000, Building