On 1 October 2017, Company A started it\'s business. During the month of October

Question

On 1 October 2017, Company A started it's business. During the month of October the following transactions occurred:

1) On Oct 1, the founder invested $1,210 in the firm in exchange for common stock.

2) On Oct 10, Company A purchased $260 worth of inventory. The company paid for $250 of the inventory in cash and purchased the rest of the inventory on account.

3) On Oct 15, Company A sold $120 worth of inventory for $220. The company collected 50% of the sale in cash and the other 50% of the sale was on account.

4) On Oct 20, Company A collected $80 from accounts receivables.

5) On 30 Oct, Company A paid dividends of $20 in cash.

Question: Determine the cash flow from operations for the month of October 2017?

a) $1,130

b) -$60

c) -$80

d) $1,300

e) $1,210

Explanation / Answer

Answer: Option b) -$60

Cash Flow from Operations: Cash receipts from customers [(50% x $220) + $80] 190 Cash paid for inventory purchases -250 Net cash flow from operations -60

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