Nevada Boot Co. reported net income of $205,000 Beginning and ending Inventory balances were $40,000 and $45,000, respectively. Accounts Payable balances at the beginning and end of the year were $35,000 and $33,000, respectively. Assuming that all relevant information has been presented, Nevada Boot would report operating cash flows of:

Question

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Operating cash flows are calculated by adjusting net income for changes in working capital. The increase in inventory ($5,000) is subtracted, and the decrease in accounts payable ($2,000) is also subtracted from net income. Thus, $205,000 - $5,000 - $2,000 = $198,000.