Gilliam industries records revenue of $6.4 million for an accounting period. in that same accounting period, they have a beginning balance of $392,000 and an ending balance of $439,000 in the accounts receivable account. how should the cash flows from operating activities be adjusted to account for these items? why? assume gilliam uses the indirect method.

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08-12-2022
Business

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Gilliam industries records revenue of $6.4 million for an accounting period. in that same accounting period, they have a beginning balance of $392,000 and an ending balance of $439,000 in the accounts receivable account. how should the cash flows from operating activities be adjusted to account for these items? why? assume gilliam uses the indirect method.

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Yogeshkumari Yogeshkumari · Answer 1 · 2022-12-15T10:53:10+01:00

Using the indirect method, Gilliam will only have to adjust for the change in Accounts Receivable, resulting in a $47,000 decrease in cash flows from operating activities.

Now, According to the question:

Using this formula to find the change in account receivable

Change in account receivable = Beginning balance - Ending balance

Change in account receivable = $392,000 − $439,000

Change in account receivable = -$47,000

When using the indirect method to calculate cash flow from operating activities, the net income amount have to be adjusted for operating items that tend to have effect on net income only.

Based on the information given Gilliam will have have to adjust for the change in Accounts Receivable, leading to $47,000 decrease in cash flows from operating activities.

Therefore the company will have have to adjust for the change in Accounts Receivable.

Learn more about Accounts Receivable at:

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