Net Income for the Year Was $45,500

question 189

Multiple Choice

Net income for the year was $45,500. Accounts receivable increased $5,500, and accounts payable increased by $11,200. Under the indirect method, the cash flow from operations is

• A) $51,200
• B) $45,500
• C) $62,200
• D) $28,800

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Definitions:

Binding

Serving to impose legal obligations or confer legal rights, and thus enforceable by law, such as a binding contract.

Doctrine of Subordination

A principle in law that allows a lower priority claim on assets or income to be elevated above others, often used in debt agreements.

Unsecured Creditors

Creditors who have provided loans or credit without taking collateral. If the borrower defaults, they have no special claim to any specific asset of the borrower.

Debts Paid

The act of fulfilling obligations by paying off owed money.