Rachel's Recordings reported net income of $200,000.Beginning balances in Accounts Receivable and Accounts Payable were $15,000 and $20,000,respectively.Ending balances in these accounts were $12,000 and $22,000,respectively.Assuming that all relevant information has been presented,Rachel's net cash flows from operating activities would be:
A)$200,000.
B)$195,000.
C)$205,000.

Question

Quizplus · Accepted Answer

The net cash flows from operating activities can be calculated by adjusting the net income for changes in working capital. The decrease in Accounts Receivable ($15,000 - $12,000 = $3,000) increases cash flow, and the increase in Accounts Payable ($22,000 - $20,000 = $2,000) also increases cash flow. Therefore, the net cash flows from operating activities are $200,000 + $3,000 + $2,000 = $205,000.

Rachel's Recordings Reported Net Income of $200,000