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:
A) $109,000.
B) $141,000.
C) $125,000.
D) $140,000.

Question

Quizplus · Accepted Answer

The increase in accounts receivable of $16,000 ($78,000 - $62,000) indicates that not all sales were collected in cash, reducing cash flows from operating activities. Therefore, $125,000 (net income) - $16,000 (increase in accounts receivable) = $109,000.

Accounts Receivable Arising from Trade Transactions Amounted to $62,000 and $78,000