Trade receivables arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year,respectively.Profit reported on the income statement for the year was $120,000.Exclusive of the effect of other adjustments,the cash flows from operating activities,prepared using the indirect method,is
A)$120,000.
B)$155,000.
C)$115,000.
D)$125,000.

Question

Quizplus · Accepted Answer

The cash flows from operating activities using the indirect method is calculated as follows:

Profit reported on the income statement = $120,000
Add: Decrease in trade receivables = $35,000 - $40,000 = $-5,000
Cash flows from operating activities = $120,000 - $5,000 = $115,000

Therefore, the correct answer is option C.

Trade Receivables Arising from Sales to Customers Amounted to $35,000