Accounts receivable from sales transactions were $44,000 at the beginning of the year and $53,000 at the end of the year. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is
A) $105,000
B) $114,000
C) $96,000
D) $158,000

Question

Quizplus · Accepted Answer

The increase in accounts receivable of $9,000 ($53,000 - $44,000) indicates that not all sales were collected in cash. Therefore, the net income of $105,000 should be adjusted by subtracting the increase in accounts receivable to arrive at the cash flows from operating activities: $105,000 - $9,000 = $96,000.

Accounts Receivable from Sales Transactions Were $44,000 at the Beginning