Ravenna Company is a merchandiser that uses the indirect method to prepare the o
ID: 2522169 • 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 $ 89,000 71,500 96,000 256,500 255,000 85,000 170,000 $ 426,500 Beginning Balance $ 106,750 77,000 87,500 271,250 245,000 61,250 183,750 $ 455,000 Cash Accounts receivable Inventory Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Total assets Accounts payable Income taxes payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity $ 56,000 43,500 105,000 122,500 99,500 $ 426,500 $ 99,500 57,000 87,500 105,000 106,000 $ 455,000 During the year, Ravenna paid a $10,500 cash dividend and it sold a piece of equipment for $5,250 that had originally cost $12,000 and had accumulated depreciation of $8,000. The company did not retire any bonds or repurchase any of its own common stock during the year.Explanation / Answer
Answer to Part 1.
Cash Balance at the end of the year = Cash Balance at the beginning of the year + Net Increase (Decrease) in Cash and cash equivalents
$89,000 = $106,750 + Net Increase (Decrease) in Cash and cash equivalents
Net Increase (Decrease) in Cash and cash equivalents = $(17,750)
Therefore, Net Decrease in cash and cash equivalents is $17,750.
Answer to Part 3.
Depreciation to be added to Net Income = Accumulated Depreciation, Ending - Accumulated Depreciation, Beginning + Depreciation on Equipment Sold
Depreciation to be added to Net Income = $85,000 - $61,250 + $8,000
Depreciation to be added to Net Income = $31,750
Decrease in Accounts Receivable = $77,000 - $71,500
Decrease in Accounts Receivable = $5,500
Amount = $5,500 (Direction = + )
Adjustments represents Cash collected from Customer > Credit Sales.
As the cash collected from Customer is more than the Credit Sales, it has reduced / Decrease the Accounts Receivable.
Effect of Increase in Inventory:
Increase in Inventory = $96,000 - $87,500
Increase in Inventory = $8,500
Amount = $8,500 (Direction = - )
Effect of Increase in Accounts Payable:
Decrease in Accounts Payable = $99,500 - $56,000
Decrease in Accounts Payable = $43,500
Amount = $43,500 (Direction = - )
Combined amount and Direction:
Amount = $52,000 (Direction = - )
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.