Cash Flows from Operations Calculation

Explanation

(6,000 - 2,800 - 800)

To calculate cash flows from operations, we need to start with net income and make adjustments for non-cash expenses and changes in working capital.

Given information: Net sales in fiscal 1998: $6,000 Cash expenses (including taxes): $2,800 Depreciation: $1,000 Increase in accounts receivable: $800

First, let's calculate net income. Net income is calculated by subtracting all expenses from net sales. We know that cash expenses (including taxes) are $2,800 and depreciation is $1,000. So, we can calculate net income as follows:

Net income = Net sales - Cash expenses - Depreciation Net income = $6,000 - $2,800 - $1,000 Net income = $6,000 - $3,800 Net income = $2,200

Now, let's calculate the adjustment for changes in working capital. In this case, we only have information about the change in accounts receivable, which increased by $800. Since accounts receivable is an asset, an increase in accounts receivable means that cash flow is negatively affected. Therefore, we subtract the increase in accounts receivable from net income to account for the decrease in cash flow:

Adjusted net income = Net income - Increase in accounts receivable Adjusted net income = $2,200 - $800 Adjusted net income = $1,400

Finally, we calculate cash flows from operations by adding back non-cash expenses (depreciation) to the adjusted net income:

Cash flows from operations = Adjusted net income + Depreciation Cash flows from operations = $1,400 + $1,000 Cash flows from operations = $2,400

Therefore, the correct answer is A. $2,400.