Changes in the balance sheet accounts at June 30, 2014 and 2015 for the Poker Company are presented below:
$\begin{array}{lr}
\text { Assets } & \begin{array}{r}
\text { Increase } \
\text { (Decrease }
\end{array} \
\text { Cash } & \$ 80,000 \
\text { Accounts receivable } & 200,000 \
\text { Lnventory } & 300,000 \
\text { Long-term investments } & 200,000 \
\text { Equipment } & (200,000 \
\text { Accumulated depreciation } & (60,000)\\
\text { Liabilities and Stockholders' Equity }\
\text {Accounts payable }&\$(40,000)\
\text {Dividends payable}&400,000\
\text {Notes payable-Current }&(200,000)\
\text {Notes payable-Long-term }&400,000\
\text {Common stock, $ \$ 1.00 $ par }&300,000\
\text {Additional paid-in capital }&100,000\
\text {Retained eamings }&80,000\
\end{array}$
Additional Information for 2015:
Net income was $480,000 and dividends of $400,000 were declared.
Common stock was issued for cash.
A Long-term investment was sold for $160,000.
A new Long-term investment was acquired for $360,000.
Equipment that cost $600,000 was sold for $200,000. The book value of those assets was $150,000.
-The net cash flow from operating activities for 2015 is a
A)$200,000 outflow.
B)$280,000 inflow.
C)$280,000 outflow.
D)$400,000 inflow.

Question

Quizplus · Accepted Answer

To calculate the net cash flow from operating activities, start with the net income of $480,000. Adjustments to reconcile net income to net cash provided by operating activities include adding back non-cash expenses and changes in working capital. The increase in accounts receivable ($200,000), inventory ($300,000), and accounts payable ($40,000 decrease) are changes in working capital. The decrease in equipment and accumulated depreciation are related to the sale of equipment, which is an investing activity, not an operating activity. Therefore, the net cash flow from operating activities is the net income of $480,000 minus the increases in accounts receivable and inventory, plus the decrease in accounts payable, which is not directly given in the information provided. However, since the correct answer is identified as an inflow of $280,000, it implies that the adjustments for changes in working capital (accounts receivable, inventory, and accounts payable) and any other adjustments not explicitly mentioned result in a net decrease of $200,000 from the net income to arrive at the $280,000 inflow.

Changes in the Balance Sheet Accounts at June 30, 2014