Let\'s Do This, Inc. had an operating income of $35,000 for the year just ended.

Question

Let's Do This, Inc. had an operating income of $35,000 for the year just ended. Balances in the company's current asset and current liability accounts at the beginning and of the year were as follows Beginning Ending Cash Accounts Receivable Inventory Accounts Payable $30,000 $40,000 $125,000 $106,000 $213,000 $180,000 $210,000 $195,000 The company reported $350,000 in Sales Revenue and a Gross Profit of $140,000. Depreciation expense totaled $8,000. Using the direct method, compute the company's cash flow from operating activities for the year. (Assume that all sales are made on account and that only inventory purchases are included in accounts payable.) O A. $80,000 O B. $177,000 O C. $125,000 O D. $87,000 O E. $51,000

Explanation / Answer

Direct method of cash flow cash from customers sales revenue 350,000 add decrease in accounts receivable 19000 369,000 Cash paid to suppliers Cost of goods sold 210000 less:Decrease in inventory 33000 add:Decrease in accounts payable 15000 192000 Cash paid for operating expense 105000 less Depreciation expense 8000 97000 net cash flow from operating activities 80,000 answer option A) $80,000 operating expense = gross profit - net income 140000-35000 105000

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