Ravenna Company is a merchandiser that uses the indirect method to prepare the o
ID: 2432872 • Letter: R
Question
Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending Balance Cash Accounts receivable Inventory Total current assets Property, plant, and equipment Beginning Balance $ 105,400 126,650 90,200 112,400102,500 301,500 3191550 287,000 71,750 198,000 215,250 83,700 297,000 99,000 Less accumulated depreciation Net property, plant, and equipment Total assets 499,500 534,600 Accounts payable Income taxes payable Bonds payable Common stock Retained earnings $ 65,600 116,500 68,600 102,500 123,000 124,000 50,900 123,000 143,500 116,500 Total liabilities and stockholders' equity $499,500 534, 600 During the year, Ravenna paid a $12,300 cash dividend and it sold a piece of equipment for $6,150 that had originally cost $14,400 and had accumulated depreciation of $9,600. The company did not retire any bonds or repurchase any of its own common stock during the year 1. What is the amount of the net increase or decrease in cash and cash equivalents that would be shown on the company's statement of cash flows? et in cash and cash equivalents 3. How much depreciation would the company add to net income on its statement of cash flows? epreciation What is the amount and direction (+or- of the accounts receivable adjustment to net income in the operating activities section of the statement of cash flows? What does this adjustment represent? Cash collected from customers> Credit sales Cash payments> Cash collected °Cash collected from customers Purchases Cash paid to suppliers Cost of goods soldExplanation / Answer
REVANNA COMPANY
Cash flow Statement
Cash Flow from Operating Activities:
Net Income
$ 4,800.00
Add: Adjustments
Depreciation Expense
$ 36,850.00
Profit on sale of Equipment
$ (1,350.00)
Decrease in Income tax payable
$ (17,700.00)
Decrease in Accounts receivables
$ 6,500.00
Increase in Inventory
$ (9,900.00)
Decrease in Accounts Payable
$ (50,900.00)
$ (36,500.00)
A. Cash Outflow from Operating Activities
$ (31,700.00)
Cash flows from Investing activities
Sale of Equipment
$ 6,150.00
Purchase of Equipment
$ (24,400.00)
B.Net cash used by investing activities
$ (18,250.00)
Cash flows from Financing activities
Proceeds from issue of Shares
$ 20,500.00
Payment od Dividend
$ (12,300.00)
Proceeds from Bonds Issue
$ 20,500.00
C. Net cash Used in financing activities
$ 28,700.00
(A+B+C) Net increase (Decrease) in cash and Cash Equivalent
$ (21,250.00)
Add: Beginning cash Balance
$ 126,650.00
Ending Cash Balance
$ 105,400.00
Part 1
Net Decrease in Cash and Cash Equivalent
$ (21,250.00)
Part 3
Depreciation to be added to income in Cash flow statement
Opening Accumulated depreciation balance
$ 71,750.00
Less: Depreciation on equipment sold
$ 9,600.00
$ 62,150.00
Less: Closing Accumulated depreciation balance
$ 99,000.00
Depreciation expense for the period
$ 36,850.00
Accounts Receivables has decreased and it will be added to Net profit to calculated cash from operations. Accounts Receivables will be in + Direction with $6500.
What does this Adjustment Represent
Meaning
Cash Collected from Customers>Credit sales
Decrease in Accounts receivables balance
Cash Collected from Customers<Credit sales
Increase in Accounts receivables balance
Cash Payments>Cash collected
Decrease in cash and cash equivalent during period.
Combined amount of Inventory and Accounts payable adjustment
Increase in Inventory
$ (9,900.00)
Decrease in Accounts Payable
$ (50,900.00)
Combined Amount
$ (60,800.00)
What does this Adjustment Represent
Meaning
Cash paid to suppliers>Purchases
Decrease in accounts Payable Balance
Cash paid to suppliers<Cost of Goods sold
Decrease in Inventory balance
Cash paid to suppliers>Cost of Goods sold
Increase in Inventory balance
REVANNA COMPANY
Cash flow Statement
Cash Flow from Operating Activities:
Net Income
$ 4,800.00
Add: Adjustments
Depreciation Expense
$ 36,850.00
Profit on sale of Equipment
$ (1,350.00)
Decrease in Income tax payable
$ (17,700.00)
Decrease in Accounts receivables
$ 6,500.00
Increase in Inventory
$ (9,900.00)
Decrease in Accounts Payable
$ (50,900.00)
$ (36,500.00)
A. Cash Outflow from Operating Activities
$ (31,700.00)
Cash flows from Investing activities
Sale of Equipment
$ 6,150.00
Purchase of Equipment
$ (24,400.00)
B.Net cash used by investing activities
$ (18,250.00)
Cash flows from Financing activities
Proceeds from issue of Shares
$ 20,500.00
Payment od Dividend
$ (12,300.00)
Proceeds from Bonds Issue
$ 20,500.00
C. Net cash Used in financing activities
$ 28,700.00
(A+B+C) Net increase (Decrease) in cash and Cash Equivalent
$ (21,250.00)
Add: Beginning cash Balance
$ 126,650.00
Ending Cash Balance
$ 105,400.00
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