During the year, Hepworth Company earned a net income of $61,725. Beginning and

Question

During the year, Hepworth Company earned a net income of $61,725. Beginning and ending balances for the year for selected accounts are as follows:

15,000

2. Suppose that all the data used in Requirement 1 except the ending accounts payable and cash balances are not known. Assume also that you know that the operating cash flow for the year was $20,475. What is the ending balance of accounts payable?

Account Beginning Ending Cash $108,000 $126,600 Accounts receivable 67,500 99,750 Inventory 36,000 52,500 Prepaid expenses 27,000 30,000 Accumulated depreciation 81,000 91,500 Accounts payable 45,000 55,125 Wages payable 27,000

15,000

Explanation / Answer

Net operating cash flow =$20475 =Movement in cash

So , closing cash balance = $108,000 + $20,475 = $128,475

Net cash flow from operating activities = Net Income + Depriciation - ( Increase in trade receivables + Increase in inventory + Increase in prepaid expenses + Decrease in wages payable ) + Increase in trade payables

Hence,

20475 = 61725+10500-(32250+16500+3000+12000) + Increase in trade payables

Increase in trade payables = 12000

So , Ending Accounts payable = $45000+$12000

= $57000

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