Nevada Boot Co. reported net income of $216,000 for its year ended December 31, 2009. Purchases totaled $152,000. Accounts payable balances at the beginning and end of the year were $36,000 and $33,000, respectively. Beginning and ending inventory balances were $44,000 and $46,000, respectively. Assuming that all relevant information has been presented, Nevada Boot would report operating cash flows of:
A)$155,000.
B)$221,000.
C)$211,000.
D)$151,000.

Question

Quizplus · Accepted Answer

Operating cash flows can be calculated using the indirect method. 
Starting with net income: 
Net Income: $216,000 
Add back non-cash expenses: 
Depreciation expense = $10,000 
Subtract changes in working capital: 
Change in accounts payable = ($36,000 - $33,000) = $3,000 decrease 
Change in inventory = ($46,000 - $44,000) = $2,000 increase 
Cash flow from operating activities = $216,000 + $10,000 - $3,000 - $2,000 = $221,000 
Therefore, the correct answer is choice C.