Ask Question
22 May, 18:46

Lucia Ltd. reported net income of $135,200 for the year ended December 31, 2021. January 1 balances in accounts receivable and accounts payable were $28,400 and $27,000, respectively. Year-end balances in these accounts were $31,700 and $22,100, respectively. Assuming that all relevant information has been presented, Lucia's cash flows from operating activities would be:

+4
Answers (1)
  1. 22 May, 18:52
    0
    Answer: Lucia's cash flows from operating activities would be as follows:

    $

    Net income 135,200

    Increase in accounts receivable (3,300)

    Decrease in accounts payable (4,900)

    Cash flows from operating activities 127,000

    Explanation: In calculating cash flows from operating activities, all non-cash items like provisions, depreciation, gains / loss on disposals, etc are usually added back or deducted to / from the net income as the case may be, in order to adjust the net income from accrual accounting to cash basis. Literally, cash flows from operating activities are cash a business generates in the ordinary course of business. In this question, there is absence of non-cash items, only the movements in receivables and payable were presented.

    Increase in accounts receivables means an outflow of cash; alternatively, decrease in accounts payable means settlement of obligations (cash outflows, as well). So, those would be deducted from the net income to arrive at cash flows from operating activities.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Lucia Ltd. reported net income of $135,200 for the year ended December 31, 2021. January 1 balances in accounts receivable and accounts ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers