Barker Company paid cash to purchase two identical inventory items.The first purchase cost $18.00 cash and the second cost $20.00 cash.Barker sold one inventory item for $30.00 cash.Based on this information alone,without considering the effect of income tax,:
A)cash flow from operating activities is $11.00 assuming a weighted average cost flow.
B)cash flow from operating activities is $12.00 assuming a FIFO cost flow.
C)cash flow from operating activities is $10.00 assuming a LIFO cost flow.
D)the amount of cash flow from operating activities is not affected by the cost flow method.

Question

Quizplus · Accepted Answer

The cash flow from operating activities is determined by the actual cash transactions, which include the cash received from sales and the cash paid for purchases. The cost flow method (FIFO, LIFO, or weighted average) affects the cost of goods sold and inventory valuation, but not the cash flow itself.

Barker Company Paid Cash to Purchase Two Identical Inventory Items