Statement of Cash Flows 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. The changes in working capital include changes in inventory, accrued wages and taxes, accounts payable, and accounts receivable. Given the net cash flow from operating activities ($25 million), net income ($15 million), depreciation ($6 million), decrease in inventory ($4 million), decrease in accrued wages and taxes ($1 million), and decrease in accounts payable ($1 million), we can solve for the change in accounts receivable. The change in accounts receivable is $25 million - ($15 million + $6 million + $4 million - $1 million - $1 million) = $2 million decrease. Therefore, the end of year balance for accounts receivable is $5 million - $2 million = $3 million.