The Hamada Company sales for 2009 totaled $150,000 and purchases totaled $95,000. Selected January 1, 2009, balances were: accounts receivable, $18,000; inventory, $14,000; and accounts payable, $12,000. December 31, 2009, balances were: accounts receivable, $16,000; inventory, $15,000; and accounts payable, $13,000. Net cash flows from these activities were:

Question

Quizplus · Accepted Answer

The net cash flows from operating activities can be calculated using the indirect method as follows:
Net cash flows from operating activities = Net income + Depreciation expense - Decrease in accounts receivable + Increase in inventory + Increase in accounts payable
Substituting the values:
= $150,000 - 0 - ($18,000 - $16,000) + ($15,000 - $14,000) + ($13,000 - $12,000)
= $152,000 - $94,000
= $58,000
Therefore, the correct answer is C.

The Hamada Company Sales for 2009 Totaled $150,000 and Purchases