Baird Company reported depreciation expense of $10,000 and net income of $16,000 on its Year 2 income statement. During Year 2, the company's accounts receivable balance decreased by $4,000. Based on this information alone, what was the amount of cash flow from operating activities?

Question

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The cash flow from operating activities is calculated by adjusting net income for non-cash expenses and changes in working capital. Start with net income of $16,000, add back the non-cash depreciation expense of $10,000, and add the $4,000 decrease in accounts receivable (since a decrease in accounts receivable indicates cash was collected). This results in a total cash flow from operating activities of $30,000.

Baird Company Reported Depreciation Expense of $10,000 and Net Income