SHE Management Corporation had accounts receivable of $105,000 and $120,000 on January 1, 2013, and December 31, 2013, respectively. Sales on account in 2013 were $310,000. The amount to be reported on the statement of cash flows under the operating activities is:

Question

Quizplus · Accepted Answer

Under the indirect method of the statement of cash flows, the adjustment for changes in accounts receivable is calculated as follows: 
Accounts receivable (ending balance) - Accounts receivable (beginning balance) = Change in accounts receivable 
$120,000 - $105,000 = $15,000 
Since the increase in accounts receivable represents a decrease in cash flows, the amount to be subtracted from net income in the operating activities section of the statement of cash flows is $15,000. 
Sales on account is not included directly in the operating activities section as it is already factored into the net income reported.

SHE Management Corporation Had Accounts Receivable of $105,000 and $120,000