Nickolas's Nut Farms, Inc. has net cash flows from operating activities for the last year of $25 million. The income statement shows that net income is $15 million and depreciation expense is $6 million. During the year, the change in inventory on the balance sheet was a decrease of $4 million, change in accrued wages and taxes was a decrease of $1 million and change in accounts payable was a decrease of $1 million. At the beginning of the year the balance of accounts receivable was $5 million. What was the end of year balance for accounts receivable?
A) $2 million
B) $3 million
C) $7 million
D) $9 million

Question

Quizplus · Accepted Answer

The net cash flow from operating activities is calculated as net income plus non-cash expenses (depreciation) and changes in working capital. Given the changes in inventory, accrued wages and taxes, and accounts payable, we can determine the change in accounts receivable. The net cash flow from operating activities is $25 million, which includes the $15 million net income, $6 million depreciation, $4 million decrease in inventory, $1 million decrease in accrued wages and taxes, and $1 million decrease in accounts payable. Solving for the change in accounts receivable, we find it decreased by $2 million, making the end of year balance $3 million.