Ravenna Company is a merchandiser that uses the indirect method to prepare the o

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:

What is the amount and direction (+ or ) of the accounts receivable adjustment to net income in the operating activities section of the statement of cash flows?

Cash payments > Cash collected

If the company debited cost of goods sold and credited inventory for $680,000 during the year, what is the total amount of inventory purchases recorded on the debit side of the Inventory T-account and the credit side of the Accounts Payable T-account?

What is the total amount of the debits recorded in the Accounts Payable T-account during the year?

What does the amount of these debits represent?

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?

What does this amount represent?

If the company debited income tax expense and credited income taxes payable $1,270 during the year, what is the total amount of the debits recorded in the Income Taxes Payable account?

What does the amount of these debits represent?

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

5a)Decrease in accounts receivable is added to net income :74800-69500=5300

5b)Cash collected from customers > Credit sales

since there is a decrease in accounts receivables

6a)cost of goods sold =Beginning inventory +purchase-ending inventory

680000=85000+purchase-93300

Purchase = 680000+93300-85000 = 688300

6b)Account payable debited(payment)=Beginning payable+purchase-ending payable

    = 96700+688300-54400

= 730600

7a)Increase in inventory =85000-93300=-8300

Decrease in accounts payable =54400-96700=-42300

Total combined effect =-8300-42300 = - 34000

7b) Cash paid to suppliers > Purchases

   730600 >688300

8a)Income tax debit (paid) =54100+1270-42300= 13070

8b)cash paid for income taxes

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