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15 January, 23:39

The Hamada Company sales for 2018 totaled $150,000 and purchases totaled $95,000. Selected January 1, 2018, balances were: accounts receivable, $18,000; inventory, $14,000; and accounts payable, $12,000. December 31, 2018, balances were: accounts receivable, $16,000; inventory, $15,000; and accounts payable, $13,000.

Net cash flows from these activities were: (A) $55,000.

(B) $74,000.

(C) $45,000.

(D) $58,000.

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Answers (1)
  1. 16 January, 00:57
    0
    Option (D) is correct.

    Explanation:

    Cash collections:

    = Sales + Decrease in accounts receivable

    = $150,000 + ($18,000 - $16,000)

    = $150,000 + $2,000

    = $152,000

    Cash disbursements:

    = Purchase - Increase in Accounts payable

    = $95,000 - (13,000 - 12,000)

    = $95,000 - $1,000

    = $94,000

    Therefore,

    Net cash flows:

    = Cash collections - Cash disbursements

    = $152,000 - 94,000

    = $58,000
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