Ravenna Company is a merchandiser that uses the indirect method to prepare the o
ID: 2533239 • 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 $14,100 cash dividend and it sold a piece of equipment for $7,050 that had originally cost $16,800 and had accumulated depreciation of $11,200. The company did not retire any bonds or repurchase any of its own common stock during the year.
7-a. What is the combined amount and direction (+ or ?) of the inventory and accounts payable adjustments to net income in the operating activities section of the statement of cash flows?
9-a. What is the amount and direction (+ or ?) of the income taxes payable adjustment to net income in the operating activities section of the statement of cash flows?
Ending Balance Beginning Balance Cash $ 121,800 $ 146,550 Accounts receivable 95,900 103,400 Inventory 128,800 117,500 Total current assets 346,500 367,450 Property, plant, and equipment 339,000 329,000 Less accumulated depreciation 113,000 82,250 Net property, plant, and equipment 226,000 246,750 Total assets $ 572,500 $ 614,200 Accounts payable $ 75,200 $ 133,500 Income taxes payable 58,300 80,200 Bonds payable 141,000 117,500 Common stock 164,500 141,000 Retained earnings 133,500 142,000 Total liabilities and stockholders’ equity $ 572,500 $ 614,200Explanation / Answer
7-a. What is the combined amount and direction (+ or ?) of the inventory and accounts payable adjustments to net income in the operating activities section of the statement of cash flows?
Combined amount = ($69,600)
Direction (+ or ?) = - Sign
Less : Increase in Inventory
($1,28,800 - $1,17,500)
($11,300)
Less : Increase Accounts payable
($1,33,500 - $75,200)
($58,300)
TOTAL
($69,600)
9-a. What is the amount and direction (+ or ?) of the income taxes payable adjustment to net income in the operating activities section of the statement of cash flows?
The amount of Income Tax Paid should be deducted from the net income in the operating activities section of the statement of cash flows.
Income Tax Paid = $21,900
($80,200 - $58,300)
Direction (+ or ?) = - Sign
Less : Increase in Inventory
($1,28,800 - $1,17,500)
($11,300)
Less : Increase Accounts payable
($1,33,500 - $75,200)
($58,300)
TOTAL
($69,600)
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