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From the information below, the net cash flow from operating activities is:Cash contributions from owner $8,000Receipt of bank interest  $50Dividend payment to shareholders $2,500Cash receipts from customers $4,500Cash purchase of computer  $2,100Depreciation on computer $50Cash payments to suppliers $3,500an inflow of $1,050.an outflow of $2,100.an inflow of $6,900.an inflow of $5,500

Question

From the information below, the net cash flow from operating activities is:Cash contributions from owner 8,000Receiptofbankinterest 8,000Receipt of bank interest  50Dividend payment to shareholders 2,500Cashreceiptsfromcustomers2,500Cash receipts from customers 4,500Cash purchase of computer  2,100Depreciationoncomputer2,100Depreciation on computer 50Cash payments to suppliers 3,500aninflowof3,500an inflow of 1,050.an outflow of 2,100.aninflowof2,100.an inflow of 6,900.an inflow of $5,500

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Solution

To calculate the net cash flow from operating activities, you need to consider only the cash flows that are related to the company's main business operations. In this case, these are the cash receipts from customers and the cash payments to suppliers.

  1. Start with the cash receipts from customers, which is $4,500.

  2. Subtract the cash payments to suppliers from the cash receipts from customers. The cash payments to suppliers are 3,500.So,3,500. So, 4,500 - 3,500=3,500 = 1,000.

The other items listed (cash contributions from owner, receipt of bank interest, dividend payment to shareholders, cash purchase of computer, and depreciation on computer) are not considered operating activities. They are either investing activities (cash purchase of computer), financing activities (cash contributions from owner, dividend payment to shareholders), or non-cash items (depreciation on computer).

So, the net cash flow from operating activities is an inflow of $1,000. None of the provided options is correct.

This problem has been solved

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