Accounts receivable from sales transactions were $45,323 at the beginning of the year and $67,072 at the end of the year. Net income reported on the income statement for the year was $143,124. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method would be a.$121,375 b.$21,749 c.$164,873 d.$143,124

a.$121,375

Explanation:

Increase in account receivable means there is more credit sales were made during the year than the cash received from the customers. So, cash will be used in the period by account recivables.

According to indirect method cash flow will be adjusted as follows

Net Income                                            $143,124

Net Increase in Rceivables                  ($21,749)

( $67,072 - $45,323)                                            

Cash Flow from Operating Activites   $121,375

A) $121,375

Explanation:

To calculate the company's net cash flows form operating activities we start with net income add beginning balance of accounts receivable and subtract ending balance of accounts receivable: $143,124 + $45,323 - $67,072 = $121,375.

Cash flows form operating activities measure the amount of cash generated by the company's regular business activities. When a company sells its products, they can receive cash or hand out credit to the client. The higher the amount of credit handed out to clients (accounts receivable), the lower the amount of cash received. The net cash flow is important because a company might sell a lot, but if it doesn't have enough money it might not be able to pay its own debts.

This is the difference between being economically healthy and financially healthy. Finances only considers the cash inflows and outflows.

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