Assume net income was $100,000,depreciation expense was $8,000,accounts receivable decreased by $7,500,and accounts payable decreased by $2,500.The amount of net cash flows from operating activities is:
A)$103,000.
B)$100,000.
C)$108,000.
D)$113,000.

Question

Quizplus · Accepted Answer

Net cash flows from operating activities is calculated by adjusting net income for changes in working capital and non-cash expenses. Start with net income of $100,000, add back depreciation of $8,000 (a non-cash expense), add the decrease in accounts receivable of $7,500 (as it indicates cash collection), and subtract the decrease in accounts payable of $2,500 (as it indicates cash payment). This results in $100,000 + $8,000 + $7,500 - $2,500 = $113,000.

Assume Net Income Was $100,000,depreciation Expense Was $8,000,accounts Receivable Decreased