MNO Reported Net Income of $42,000 for the Reporting Period

question 15

Multiple Choice

MNO reported net income of $42,000 for the reporting period ended December 3, 2011. MNO's records provided the following information: $$\begin{array} { | l | l | } \hline \text { Decrease in accounts payable } & \$ 5,000 \\\hline \text { Depreciation expense } & \$ 6,000 \\\hline \text { Amortiz ation of premium on bonds payable } & \$ 500 \\\hline \text { Declared a cash dividend } & \$ 2,000 \\\hline \text { ncrease in inventory } & \$ 3,000 \\\hline \text { Decrease in accounts receivable } & \$ 8,000 \\\hline \text { increase in income tax payable } & \$ 1,000 \\\hline \text { Decrease in long-term debt principal } & \$ 10,000 \\\hline\end{array}$$ The net cash flow from operating activities was:

• A) $36,500.
• B) $38,500.
• C) $46,500.
• D) $49,500.

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Definitions:

Days' Sales in Receivables

A financial metric that measures how quickly a company collects on sales made on credit, indicating the average number of days it takes to convert receivables into cash.

Allowance Method

An accounting technique used to estimate the amount of uncollectible accounts receivable and adjust for bad debts.

Uncollectible Accounts

Accounts receivable that a business is unable to collect, often written off as a bad debt expense.

Accounting Equation

A fundamental financial equation representing the relationship between assets, liabilities, and equity (Assets = Liabilities + Equity).