A is corrent. Because Baker is in its first year of operations, the beginning balances of all accounts are zero. Cash flow from operating activities is calculated as net income minus the increase in accounts receivable, plus the increase in accounts payable (78,000 – 82,000 + 24,000) = increase in cash from operating activities of $20,000. Cash flows from common stock and dividends are included in financing activities.
B is incorrect. Because Baker is in its first year of operations, the beginning balances of all accounts are zero. Cash flow from operating activities is calculated as net income minus the increase in accounts receivable, plus the increase in accounts payable (78,000 – 82,000 + 24,000) = increase in cash from operating activities of $20,000. Cash flows from common stock and dividends are included in financing activities.
C is incorrect. Because Baker is in its first year of operations, the beginning balances of all accounts are zero. Cash flow from operating activities is calculated as net income minus the increase in accounts receivable, plus the increase in accounts payable (78,000 – 82,000 + 24,000) = increase in cash from operating activities of $20,000. Cash flows from common stock and dividends are included in financing activities.
D is incorrect. Because Baker is in its first year of operations, the beginning balances of all accounts are zero. Cash flow from operating activities is calculated as net income minus the increase in accounts receivable, plus the increase in accounts payable (78,000 – 82,000 + 24,000) = increase in cash from operating activities of $20,000. Cash flows from common stock and dividends are included in financing activities.
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