Innovative Products reported net income of $205,000.Beginning and ending Inventory balances were $40,000 and $45,000,respectively.Accounts Payable balances at the beginning and end of the year were $35,000 and $33,000,respectively.Assuming that all relevant information has been presented,the company would report net operating cash flows of:
A)$202,000.
B)$198,000.
C)$212,000.

Question

Quizplus · Accepted Answer

Net Operating Cash Flows = Net Income + Depreciation + Increase in Accounts Payable - Increase in Inventory
Net Income = $205,000
Depreciation = Not given
Increase in Accounts Payable = $33,000 - $35,000 = -$2,000
Increase in Inventory = $45,000 - $40,000 = $5,000

Net Operating Cash Flows = $205,000 + Depreciation - $2,000 + $5,000
We cannot determine the value of Depreciation, so we cannot accurately calculate the Net Operating Cash Flows. However, we can eliminate choices A and C since they both have a specific value for Net Operating Cash Flows. Therefore, the best choice is B, which acknowledges that we cannot determine the exact value of Net Operating Cash Flows without additional information.

Innovative Products Reported Net Income of $205,000