Accounts receivable arising from sales to customers amounted to $40,000 and $32,

Question

Accounts receivable arising from sales to customers amounted to $40,000 and $32,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $110,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is (Points: 4)
$118,000.
$110,000.
$102,000.
$150,000.

Credit memos from the bank (Points: 4)
decrease a bank customer's account
are used to show a bank service charge
show that a company has deposited a customer's NSF check
show the bank has collected a note receivable for the customer

Explanation / Answer

Calculating the Cash flows from Operating activities: Net income - Increase in Accounts receivables = Cash flows from Operating activities Net income + Decrease in Accounts receivables = Cash flows from Operating activities The Beginning accounts receivables is $40,000 Ending accounts receivables is $32,000 Therefore, there is a decrease in accounts receivables ($40,000 - $32,000) = $8,000 This decrease in accounts receivables should be added to net income to arrive at cash flows from Operating activities. $110,000 + $8,000 = $118,000 Therefore, the correct option is a) $118,000 Credit memo show the bank has collected a note receivable for the customer. The correct option is d)

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