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17 October, 09:12

Innovative Products reported net income of $222,000. Beginning and ending inventory balances were $45,000 and $46,000, respectively. Accounts Payable balances at the beginning and end of the year were $38,500 and $35,500, respectively. Assuming that all relevant information has been presented, the company would report net operating cash flows of:

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  1. 17 October, 09:42
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    net operating cash flows = $218000

    Explanation:

    given data

    net income = $222,000

    Beginning inventory = $45,000

    ending inventory = $46,000

    Beginning Accounts payable = $38,500

    ending Accounts payable = $35,500

    to find out

    net operating cash flows

    solution

    first we get here Increase in Inventory that is

    Increase Inventory = ending inventory - Beginning inventory ... 1

    put here value

    Increase Inventory = $46,000 - $45,000

    Increase Inventory = $1000

    and

    Decrease in Accounts payable will be here as

    Decrease in Accounts payable = Beginning Accounts payable - ending Accounts payable ... 2

    put here value we get

    Decrease in Accounts payable = $38,500 - $35,500

    Decrease in Accounts payable = $3000

    so net operating cash flows will be

    net operating cash flows = Net Income - Increase Inventory - Decrease in Accounts payable ... 3

    put here value

    net operating cash flows = $222,000 - $1000 - $3000

    net operating cash flows = $218000
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