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Frederick Corporation reports net income of $410,000. Accounts Payable balances at the beginning and end of the year were $50,000 and $39,000, respectively. Interest Payable balances at the beginning and end of the year were $27,000 and $30,000, respectively. What is the company’s cash inflows from operating activities?Multiple Choice$402,000$418,000$424,000$396,000

Question

Frederick Corporation reports net income of 410,000.AccountsPayablebalancesatthebeginningandendoftheyearwere410,000. Accounts Payable balances at the beginning and end of the year were 50,000 and 39,000,respectively.InterestPayablebalancesatthebeginningandendoftheyearwere39,000, respectively. Interest Payable balances at the beginning and end of the year were 27,000 and 30,000,respectively.Whatisthecompany’scashinflowsfromoperatingactivities?MultipleChoice30,000, respectively. What is the company’s cash inflows from operating activities?Multiple Choice402,000418,000418,000424,000$396,000

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Solution

To calculate the company's cash inflows from operating activities, we need to adjust the net income for changes in current liabilities.

Here's how to do it:

  1. Start with the net income: $410,000
  2. Subtract the decrease in Accounts Payable: 50,000(beginningbalance)−50,000 (beginning balance) - 39,000 (end balance) = $11,000 decrease
  3. Add the increase in Interest Payable: 30,000(endbalance)−30,000 (end balance) - 27,000 (beginning balance) = $3,000 increase

So, the calculation would be: 410,000(netincome)−410,000 (net income) - 11,000 (decrease in Accounts Payable) + 3,000(increaseinInterestPayable)=3,000 (increase in Interest Payable) = 402,000

Therefore, the company's cash inflows from operating activities is $402,000.

This problem has been solved

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