During the 2016 accounting period the Mallard Company earned $165,000 of sales revenue on account and accrued $122,500 of operating expenses.The company also earned $26,400 of service revenue that had previously been recorded as unearned revenue.In addition,a $2,200 stock dividend was issued to the stockholders.What can be said about cash flows considering these transactions?

Question

Quizplus · Accepted Answer

Cash inflows from operating activities can be calculated by subtracting the accrued operating expenses from the sales revenue earned on account, which is $165,000 - $122,500 = $42,500. The stock dividend has no effect on the cash flows from operating activities or investing activities, but it does decrease cash flows from financing activities by $2,200. The previously unearned service revenue indicates that cash was received in a previous period, so it does not affect current period cash flows. Thus, the best choice is C.

During the 2016 Accounting Period the Mallard Company Earned $165,000