December 2007 December 2008 Net income $2,000 $5,000 Accounts receivable 750 750

Question

                                       December 2007       December 2008
Net income                              $2,000                $5,000
Accounts receivable                       750                     750
Accumulated depreciation            1,000                 1,500
Common stock                             4,500                  5,000
Paid-in capital                             7,500                  8,000
Retained earnings                         1,500                 2,500
Accounts payable                             750                    750

a. 3,375
b. 3,750
c. 6,500
d. 5,500

Explanation / Answer

Increase in net Income = (5000-2000) $3,000 Add :Depreciation = (1500-1000) $500 Add: Dividend paid (3000-(2500-1500)) $2,000 After tax cash flow from operations $5,500 CORRECT OPTION    D Increase in net Income = (5000-2000) $3,000 Add :Depreciation = (1500-1000) $500 Add: Dividend paid (3000-(2500-1500)) $2,000 After tax cash flow from operations $5,500 CORRECT OPTION    D

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