Question

What is the cash flow from operating activities under direct method using the following information:

$\begin{array}{ccc}\text{December 31}& 2011& 2010\\ \text{Accounts Receivable}& \$34,130& \$28,410\\ \text{Prepaid Rent}& 20,000& 25,000\\ \text{Prepaid Insurance}& 6,800& 6,000\\ \text{Inventory}& 23,030& 15,450\\ \text{Accounts Payable}& 14,590& 31,300\\ \text{Salaries Payable}& 8,310& 5.120\\ \text{Interest Payable}& 700& 360\\ \text{Income Tax Payable}& 2,340& 0\\ \text{Year Ended December 31}& 2011& \\ \text{Net Sales}& 64,970& \\ \text{Salaries Expense}& 8,610& \\ \text{Rent Expense}& 5,000& \\ \text{Insurance Expense}& 3,200& \\ \text{Interest Expense}& 1,650& \end{array}$

• A. Rs 22,240
• B. Rs 24,230
• C. Rs 23,240
• D. None of these

Answer 1

The correct option is B

Rs 24,230

Rs.24,230

$\begin{array}{cc}\text{Cash flow from Operating Activities:}& \\ \text{Cash Receipts}& \\ \text{From Customer (1)}& \$59,250\\ \text{Cash Payments}& \\ \text{To Suppliers (2)}& -24,290\\ \text{To Employees (3)}& -5,420\\ \text{For Purchase of Prepaid Assets (4)}& -4,000\\ \text{Interest (5)}& -1,310\\ \text{Income Tax (6)}& -0\\ \text{Net Cash flow from Operating Activities}& 24,230\end{array}$