The following data about Atlantis Trading Inc. is available. What is Atlantis’s cash flow from operating activities? Items Amount ($)
Net income
45,000
Increase in stock
5,000
Decrease in accounts receivables
2,000
Increase in salaries payable
10,000

A.
$54,000

B.
$51,000
C.
$53,000
D.
$52,000

The correct option is D. $52,000.

Explanation:

Atlantis’s cash flow from operating activities can be calculated as follows:

Atlantis Trading Inc.

Calculation of Cash Flow from Operating Activities

Items                                                                Amount ($)      

Net income                                                          45,000

Adjustment to reconcile net income

(Increase) decrease in current assets:

Increase in stock                                                 (5,000)

Decrease in accounts receivables                      2,000

Increase (decrease) in current liabilities:

Increase in salaries payable                               10,000  

Cash flow from operating activities               (52,000)  

The above implies that:

Cash flow from operating activities = Net income - Increase in stock + Decrease in accounts receivables + Increase in salaries payable = $45,000 - $5,000 + $2,000 + $10,000 = $52,000

Therefore, the correct option is D. $52,000.