Statement of Cash Flows Ann's Flowers Inc. reported 2008 net income of $1.90 million and depreciation...

Statement of Cash Flows Ann's Flowers Inc. reported 2008 net income of $1.90 million and depreciation of $259,000. The top part Ann's Flowers, Inc.'s 2007 and 2008 balance sheets is listed below (in millions of dollars).

Current assets:	2007	2008	Current liabilities:	2007	2008
Cash and marketable securities	$3.90	$2.45	Accrued wages and taxes	$1.09	$1.09
Accounts receivable	4.45	5.90	Accounts payable	3.09	4.45
Inventory	6.90	5.45	Notes payable	11.07	8.26
Total	$15.25	$13.80	Total	$15.25	$13.80

What is the 2008 net cash flow from operating activities for Ann's Flower's, Inc.?

A. $1,619,000

B. $3,519,000

C. -$1,450,000

D. $1,900,000

Solutions

Expert Solution

Answer: -

Net cash flow from operating activity: -

Cash flow from Operating activity
	Particulars	Amount (Millions in $)	Amount (Millions in $)
	Net profit		1.900
Add: -	Depreciation		0.259
			2.159
Less: -	Increase in accounts receivable	(1.45)
Add: -	Decrease in inventory	1.45
Add: -	Increase in accounts payable	1.36	1.360

	Net cash flow from operating activity		3.519

Cash flow from operating activity can be computed using direct method or indirect method.

The above calculations has been done using indirect method.

Calculations are done as follows: -

Net income + Depreciation + decrease in current asset + Increase in current liability - increase in current asset + Decrease in current asset

Conclusion: -

The options given in question is

a. $1,619,000

b. $3,519,000

c. -$1,450,000

d. $1,900,000

Hence from the above calculations, the net cash from operating activity is $3,519,000.

Therefore , the correct option is "b".

jeff jeffy answered 1 year ago

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