Ravenna Company is a merchandiser that uses the indirect method to prepare the o
ID: 2482420 • 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:
During the year, Ravenna paid a $12,900 cash dividend and it sold a piece of equipment for $6,450 that had originally cost $15,000 and had accumulated depreciation of $10,000. The company did not retire any bonds or repurchase any of its own common stock during the year.
Would the operating activities section of the company’s statement of cash flows contain an adjustment for a gain or a loss? What would be the amount and effect of the adjustment?
What is the amount of net cash provided by (used in) operating activities in the company’s statement of cash flows?
What is the amount of gross cash outflows reported in the investing section of the company’s statement of cash flows?
What is the company’s net cash provided by (used in) investing activities?
What is the amount of gross cash inflows reported in the financing section of the company’s statement of cash flows?
What is the company’s net cash provided by (used in) financing activities?
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:
Explanation / Answer
1
Yes, operating activities section of the company’s statement of cash flows shall contain an adjustment for a gain or a loss.
Calculation of amount and effect of the adjustment:
Sale price of equipment
$ 6,450
Less: Book Value of Equipment sold (15000-10000)
$ (5,000)
Gain on Sale of Equipment
$ 1,450
2
Calculation of amount of net cash provided by (used in) operating activities :
Net Income (122200 - (130000-12900)
$ 5,100
Less: Gain on Sale of Equipment
$ (1,450)
Add: Decrease in Accounts Rceivables (94600-87800)
$ 6,800
Less: Increase in inventories (117900 - 107500)
$ (10,400)
Add: Depreciation (104000-75250) + 10000
$ 38,750
Add: Decrease in Accounts Payable (122200-68800)
$ 53,400
Add: Decrease in Income Tax Payable (71500-53400)
$ 18,100
Amount of net cash provided by operating activities
$110,300
3
Calculation of amount of gross cash outflows reported in the investing section:
Purchase of Property, plant, and equipment (312000 - (301000-15000)
$ (26,000)
4
Calculation of company’s net cash provided by (used in) investing activities
Purchase of Property, plant, and equipment (312000 - (301000-15000)
$ (26,000)
Sale of Equipment
$ 6,450
Company’s net cash provided by (used in) investing activities
$ (19,550)
1
Yes, operating activities section of the company’s statement of cash flows shall contain an adjustment for a gain or a loss.
Calculation of amount and effect of the adjustment:
Sale price of equipment
$ 6,450
Less: Book Value of Equipment sold (15000-10000)
$ (5,000)
Gain on Sale of Equipment
$ 1,450
2
Calculation of amount of net cash provided by (used in) operating activities :
Net Income (122200 - (130000-12900)
$ 5,100
Less: Gain on Sale of Equipment
$ (1,450)
Add: Decrease in Accounts Rceivables (94600-87800)
$ 6,800
Less: Increase in inventories (117900 - 107500)
$ (10,400)
Add: Depreciation (104000-75250) + 10000
$ 38,750
Add: Decrease in Accounts Payable (122200-68800)
$ 53,400
Add: Decrease in Income Tax Payable (71500-53400)
$ 18,100
Amount of net cash provided by operating activities
$110,300
3
Calculation of amount of gross cash outflows reported in the investing section:
Purchase of Property, plant, and equipment (312000 - (301000-15000)
$ (26,000)
4
Calculation of company’s net cash provided by (used in) investing activities
Purchase of Property, plant, and equipment (312000 - (301000-15000)
$ (26,000)
Sale of Equipment
$ 6,450
Company’s net cash provided by (used in) investing activities
$ (19,550)
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