Castile Inc. had a beginning balance of $2,900 in its Accounts Receivable account. The ending balance of Accounts Receivable was $3,400.

Castile Inc. had a beginning balance of $2,900 in its Accounts Receivable account. The ending balance of Accounts Receivable was $3,400. During the period, Castile recognized $57,000 of revenue on account. Castile’s Salaries Payable account has a beginning balance of $2,050 and an ending balance of $1,200. During the period, the company recognized $49,000 of accrued salary expense.

 

Explanation:

a.
Computation of net income:

Revenue recognized on account	$	57,000
Less: Accrued salary expense		(49,000	)
Net income	$	8,000

b.
Computation of cash collected from accounts receivable:

Beginning balance of accounts receivable	$	2,900
Add: Revenue recognized on account		57,000
Less: Ending balance of accounts receivable		(3,400	)
Cash collected from accounts receivable	$	56,500

Computation of cash paid for salaries expense:

Beginning balance of salaries payable	$	2,050
Add: Accrued salary expense recognized		49,000
Less: Ending balance of salaries payable		(1,200	)
Cash paid for salary expense	$	49,850

Cash flow from operating activities:

Cash from accounts receivable	$	56,500
Cash paid for salary expense		(49,850	)
Net cash flow from operating activities	$	6,650