Mary's Music Store reported net income of $135,000.Beginning balances in Accounts Receivable and Accounts Payable were $29,000 and $26,000,respectively.Ending balances in these accounts were $30,000 and $24,000,respectively.Assuming that all relevant information has been presented,Mary's net cash flows from operating activities would be:
A)$132,000.
B)$134,000.
C)$136,000.

Question

Quizplus · Accepted Answer

To determine the net cash flows from operating activities, we use the indirect method and make adjustments for changes in non-cash current assets and liabilities.
Starting with net income of $135,000, we add back the decrease in accounts payable of $2,000 ($26,000 - $24,000) and subtract the increase in accounts receivable of $1,000 ($30,000 - $29,000).
Net cash flows from operating activities = $135,000 + $2,000 - $1,000 = $132,000. Therefore, the best choice is A.

Mary's Music Store Reported Net Income of $135,000