Managerial Accounting Multiple choice question

Question

10. Otto's Office Supplies, Inc. has an accrual basis net income of $208,000 in 2016 and the following related items:

 

Amortization expense $52,000

Accounts receivable decrease 28,000

Inventory decrease 20,000

Interest payable increase 24,000

Dividends paid 4,000

 

What is Otto's Office Supplies, Inc.'s net cash flow from operating activities in 2016?

A) $332,000

B) $280,000

C) $236,000

D) $328,000

Answer 1

Net income (accrual basis): $208,000

Amortization expense: $52,000 (non-cash, add back)

Accounts receivable decrease: $28,000 (cash inflow, add back)

Inventory decrease: $20,000 (cash inflow, add back)

Interest payable increase: $24,000 (cash inflow, add back)

Dividends paid: $4,000 (not part of operating activities → ignore)

Start with Net Income:

→ $208,000

Add:

1. Amortization expense: $52,000
2. Decrease in accounts receivable: $28,000
3. Decrease in inventory: $20,000
4. Increase in interest payable: $24,000

Total Net Cash Flow from Operating Activities:

208,000+52,000+28,000+20,000+24,000=332,000

✅ Correct Answer: A) $332,000