To determine the cash flow from the given information, we need to analyze the changes in various account balances from December 31 to January 1 and calculate the effect these changes have on the net income to find the cash flow. Here's the step-by-step solution:
1. Calculate the change in Accounts Receivable:
- Accounts receivable on December 31: \[tex]$22,400
- Accounts receivable on January 1: \$[/tex]19,400
- Change in Accounts Receivable = January 1 balance - December 31 balance
- Change in Accounts Receivable = 19,400 - 22,400 = [tex]\(-3,000\)[/tex]
2. Calculate the change in Allowance for Uncollectible Accounts:
- Allowance on December 31: \[tex]$29,000
- Allowance on January 1: \$[/tex]23,000
- Change in Allowance = January 1 balance - December 31 balance
- Change in Allowance = 23,000 - 29,000 = [tex]\(-6,000\)[/tex]
3. Calculate the change in Prepaid Rent Expense:
- Prepaid Rent on December 31: \[tex]$1,000
- Prepaid Rent on January 1: \$[/tex]800
- Change in Prepaid Rent = January 1 balance - December 31 balance
- Change in Prepaid Rent = 800 - 1,000 = [tex]\(-200\)[/tex]
4. Calculate the change in Accounts Payable:
- Accounts Payable on December 31: \[tex]$8,200
- Accounts Payable on January 1: \$[/tex]12,400
- Change in Accounts Payable = January 1 balance - December 31 balance
- Change in Accounts Payable = 12,400 - 8,200 = [tex]\(4,200\)[/tex]
5. Calculate the net change in working capital:
- Net Change = Change in Accounts Receivable + Change in Allowance + Change in Prepaid Rent + Change in Accounts Payable
- Net Change = [tex]\(-3,000\)[/tex] + [tex]\(-6,000\)[/tex] + [tex]\(-200\)[/tex] + [tex]\(4,200\)[/tex] = [tex]\(-5,000\)[/tex]
6. Calculate the cash flow:
- Net income: \[tex]$150,000
- Cash flow = Net income + Net change in working capital
- Cash flow = 150,000 + \(-5,000\) = \$[/tex]145,000
Therefore, none of the provided answer choices (A, B, or C) are correct. The correct cash flow is \$145,000.
