Servo Industries' net income was $300,000.Given the account information below,what is the net operating cash flows for Servo Industries? $$\begin{array} { | l | r | }
\hline \text { Decrease in Acc ounts Receivable } & \$ 50,000 \
\hline \text { Decrease in Salaries Payable } & \$ 75,000 \
\hline \text { Decrease in Inventory } & \$ 20,000 \
\hline \text { Depreciation Expense } & \$ 35,000 \
\hline \text { Increase in Interest Payable } & \$ 7,000 \
\hline
\end{array}$$
A)$487,000.
B)$323,000.
C)$337,000.

Question

Servo Industries' net income was $300,000.Given the account information below,what is the net operating cash flows for Servo Industries? $$\begin{array} { | l | r | } 
\hline \text { Decrease in Acc ounts Receivable } & \$ 50,000 \
\hline \text { Decrease in Salaries Payable } & \$ 75,000 \
\hline \text { Decrease in Inventory } & \$ 20,000 \
\hline \text { Depreciation Expense } & \$ 35,000 \
\hline \text { Increase in Interest Payable } & \$ 7,000 \
\hline
\end{array}$$
A)$487,000.
B)$323,000.
C)$337,000.

Quizplus · Accepted Answer

To calculate the net operating cash flows, start with the net income of $300,000 and adjust for changes in working capital and non-cash expenses. Add the decrease in accounts receivable ($50,000), the decrease in inventory ($20,000), and the depreciation expense ($35,000) because these either represent cash inflows or non-cash expenses. Subtract the decrease in salaries payable ($75,000) because this represents a cash outflow. Add the increase in interest payable ($7,000) as it represents an obligation that has not yet resulted in a cash outflow. The calculation is $300,000 + $50,000 + $20,000 + $35,000 - $75,000 + $7,000 = $337,000.

Servo Industries' Net Income Was $300,000 A)$487,000