[The Following Information Applies to the Questions Displayed Below

question 34

Multiple Choice

[The following information applies to the questions displayed below.]

On January 1, Year 2 Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account.


-What is the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows?

• A)$97,000
• B)$104,000
• C)$89,520
• D)$95,060

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Definitions:

Entitlement

A right or benefit guaranteed by law or contract, especially in the context of social welfare or employee benefits.

Qualified Retirement

A retirement plan that meets requirements set forth by the IRS that allows for tax benefits for the employer and employee.

Strict Tax Regulations

Rigorous laws and rules governing the assessment and collection of taxes from individuals and businesses.

Favorable Tax Treatment

Favorable Tax Treatment involves tax policies that are advantageous to businesses or individuals, reducing the amount of taxes owed.