The Water Fun Store is a retailer of water sports products forbackyard swimming

Question

The Water Fun Store is a retailer of water sports products forbackyard swimming pools, During August; the Firm had the followingoperating activities:

Aug 1 Bought 5,000 of goods for resale from Pine treewholesalers on credit.

Aug 5 Paid 450 to the local newspaper for advertising that randuring July.

Aug 6 Paid 975 rent for the month of August.

Aug 9 sold goods to customers for 7,300 on credit. Thesegoods had cost the firm 3,600.

Aug 10 Paid 3,000 to Pine tree Wholesalers in partial paymentfor goods purchased August 1.

Aug 11 Collected 5,350 from goods sold on August 9.

Aug 13 Bought 9,200 of goods for resale from StanleyCompany. Paid cash.

Aug 16 Paid employees for their work so far in August, 1,050

Aug 19 Sold goods to customers on credit for6,350. These goods had cost the firm 2,400.

Aug 25 Collected 3,700 from the sales made on August19.

Aug 29 Paid 975 rent for the month of September.

Aug 31 Employees had earned an additional 1,200 of wages butwould not be paid until September 1.

A. Prepare a report of net cash flow from operatingactivities.

B. Prepare an accrual basis income statement.

C. Which statement documents a more realistic or completepicture of Augusts activity? Why?

Explanation / Answer

Cash Flow Statement Sources of Cash Collection for sales made on Aug 9 5,350.00 Collection for sales made on Aug 19 3,700.00 9,050.00 Applications of Cash Advertisement 450.00 Rent 975.00 Payment to suppliers 3,000.00 Bought Goods for resale 9,200.00 Payment to workers 1,050.00 Rent for September 975.00 15,650.00 Cash Used by Operating Activities (6,600.00) Income Statement Sales on August 9 7,300.00 Sales on August 19 6,350.00 13,650.00 Less Cost Of Goods Sold Sales on August 9 3,600.00 Sales on August 19 2,400.00 6,000.00 Gross Profit 7,650.00 Less : Expenses Rent 975.00 Wages 1,050.00 Accrued Wages 1,200.00 3,225.00 Net Income 4,425.00 Cash Flow Statement documents or depicts the Cash position of business. Whereas the income statement summarizes the results of operations of a business . Both of them serve two different purposes . You can put it this way: Cash Flow Statement depicts the Cash position of the business . Income Statement tells us whether the business is making a profit or loss.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.