Accrual income vs cash flow for a period. AB Book Sales supplies textbooks to co

Question

Accrual income vs cash flow for a period. AB Book Sales supplies textbooks to colleges. Books are shipped with the provision that they must be paid for in thirty days, but can be returned for a full refund credit for 90 days. In 2014, they shipped and billed for books totalling $760,000. Collection, net of return credits during the year totalled $690,000. The company spent $300,000.00 aquiring the books.

a. Using the accrual accounting method and these values, show the firm's net profit for the past year.

b. Using cash accounting and these values, show the firm's net cash flow fo the past year.

c. Which of these statements is more use to the financial manager? Why?

Explanation / Answer

Accrual income vs cash flow for a period. AB Book Sales supplies textbooks to co

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