Husky Company has provided the following information for its most recent year of operation: Cash collected from customers totaled $89,300.
Cash borrowed from banks totaled $31,700.
Cash paid to employees for salaries totaled $32,100.
Cash received from selling Husky common stock to stockholders totaled $41,000.
Cash payments to banks for repayment of money borrowed totaled $7,500.
Cash paid to suppliers totaled $12,500.
Land costing $25,000 was sold for $25,000 cash.
Cash paid for dividends to stockholders totaled $3,300.
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How much was Husky's cash flow from operating activities?

Question

Quizplus · Accepted Answer

To calculate the cash flow from operating activities, we need to start with net income and adjust for non-cash expenses and changes in working capital. However, net income is not given in the information provided. Instead, we can use the indirect method and start with cash collected from customers, add back non-cash expenses (such as depreciation), and adjust for changes in working capital (such as changes in accounts receivable or accounts payable). 
In this case, we do not have information on non-cash expenses, but we can make some assumptions (such as assuming no depreciation expense) and focus on the changes in working capital. Cash collected from customers totaled $89,300, and cash paid to employees for salaries totaled $32,100, so the net increase in accounts receivable (assuming all sales were on credit) was $57,200 ($89,300 - $32,100). Cash paid to suppliers totaled $12,500, so the net increase in accounts payable (assuming all purchases were made on credit) was $12,500. 
Therefore, the cash flow from operating activities can be calculated as:
Cash collected from customers - cash paid to employees - net increase in accounts receivable + net increase in accounts payable = $89,300 - $32,100 - $57,200 + $12,500 = $12,500.
This means that Husky had a cash flow from operating activities of $12,500 for the year. However, this may not be a complete or accurate representation of Husky's operating activities without more information on non-cash expenses and other changes in working capital. 
Option B is the only answer choice that matches this explanation.

Husky Company Has Provided the Following Information for Its Most