Calculate Cash Inflow or Outflow from Operating Activities Given the Following

question 96

Multiple Choice

Calculate cash inflow or outflow from operating activities given the following information: profit before tax $11,250; depreciation expense $1,250; interest paid $725; tax paid $1,050; decrease in AR $125; increase in inventory $900; decrease in AP $700.

• A)Inflow of $10,375
• B)Inflow of $8,850
• C)Outflow of $14,650
• D)Outflow of $6,150

---

Definitions:

Allowance Method

The allowance method is an accounting technique that estimates uncollectible accounts receivable, adjusting for debts likely not to be collected.

90-Day Note

A short-term debt security that matures in 90 days, typically used in the financing of inventory, accounts receivable, or other short-term needs.

Note Receivable

Note Receivable is a financial asset representing a written promise to receive a specific amount of money from another party on a determined future date or dates.

Credit Sales

Sales transactions where the payment is delayed as per agreed terms between the seller and the buyer.