D is corrent. The net cash flow provided by operations can be computed using either the indirect approach or the direct approach. In this question, the direct approach is used. Under the direct approach, each income statement item is directly adjusted for changes in related balance sheet items, and these adjusted amounts are used to compute the net cash flow. The items in this question have already been adjusted, so the net cash flow can be computed as follows:| Cash received from customers | $870,000 | | Rent received | 10,000 | | Cash paid to suppliers and employees | (510,000) | | Taxes paid | (110,000) | | Net cash flow provided by operations | $260,000 |
Dividends are not used because they are a financing activity.A is incorrect. The net cash flow provided by operations can be computed using either the indirect approach or the direct approach. In this question, the direct approach is used. Under the direct approach, each income statement item is directly adjusted for changes in related balance sheet items, and these adjusted amounts are used to compute the net cash flow. The items in this question have already been adjusted, so the net cash flow can be computed as follows:| Cash received from customers | $870,000 | | Rent received | 10,000 | | Cash paid to suppliers and employees | (510,000) | | Taxes paid | (110,000) | | Net cash flow provided by operations | $260,000 |
Dividends are not used because they are a financing activity.B is incorrect. The net cash flow provided by operations can be computed using either the indirect approach or the direct approach. In this question, the direct approach is used. Under the direct approach, each income statement item is directly adjusted for changes in related balance sheet items, and these adjusted amounts are used to compute the net cash flow. The items in this question have already been adjusted, so the net cash flow can be computed as follows:| Cash received from customers | $870,000 | | Rent received | 10,000 | | Cash paid to suppliers and employees | (510,000) | | Taxes paid | (110,000) | | Net cash flow provided by operations | $260,000 |
Dividends are not used because they are a financing activity.C is incorrect. The net cash flow provided by operations can be computed using either the indirect approach or the direct approach. In this question, the direct approach is used. Under the direct approach, each income statement item is directly adjusted for changes in related balance sheet items, and these adjusted amounts are used to compute the net cash flow. The items in this question have already been adjusted, so the net cash flow can be computed as follows:| Cash received from customers | $870,000 | | Rent received | 10,000 | | Cash paid to suppliers and employees | (510,000) | | Taxes paid | (110,000) | | Net cash flow provided by operations | $260,000 |
Dividends are not used because they are a financing activity. |
