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2 April, 20:31

Nevada Boot Co. reported net income of $217,000 for its year ended December 31, 2021. Purchases totaled $152,900. Accounts payable balances at the beginning and end of the year were $36,600 and $32,100, respectively. Beginning and ending inventory balances were $43,100 and $46,300, respectively.

Assuming that all relevant information has been presented, Nevada Boot would report operating cash flows of:

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  1. 2 April, 20:32
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    The answer is $209,300

    Explanation:

    This is an indirect method of preparing cash flow. Why? - Because indirect method of preparing cash flow start with net income under cash flow for operating activities section.

    Account payable decrease over the year ($36,600 - $32,100)

    =$4,500

    Inventory balance increase over the year ($46,300 - $43,100)

    =$3,200

    Therefore, Nevada Boot would report operating cash flows of:

    Net income ... $217,000

    Less:

    Increase in inventory ... ($3,200)

    Decrease in accounts payable ... ($4,500)

    Cash flow from operating activities ... $209,300
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