ABC reported sales revenue of $100,000 and expenses of $106,000 for the period ended December 31, 2011; accounts receivable decreased by $500; accounts payable increased by $2,500; accrued wages payable decreased by $1,500; short-term loans to banks increased by $600; and depreciation expense of $4,000 was recorded. What was the amount of net cash flow from operating activities for 2011?

Question

Quizplus · Accepted Answer

To calculate net cash flow from operating activities, we start with net income ($100,000 - $106,000 = $ -6,000). Then we add back non-cash expenses (depreciation expense of $4,000) and subtract any changes in working capital (accounts receivable decreased by $500, accounts payable increased by $2,500, and accrued wages payable decreased by $1,500). Finally, we add any increase in short-term loans to banks ($600). Therefore, net cash flow from operating activities = - $6,000 + $4,000 - $500 + $2,500 - $1,500 + $600 = $1000 outflow.

ABC Reported Sales Revenue of $100,000 and Expenses of $106,000