5. Ace Co. purchased inventory that cost $10,000 under terms 2/10, n/30. The inv

ID: 2428005 • Letter: 5

Question

5. Ace Co. purchased inventory that cost $10,000 under terms 2/10, n/30. The inventory was delivered under terms FOB destination. Freight costs of $500 were paid in cash. Ace paid for the inventory within ten days. Ace sold the goods on account for $13,000, freight terms FOB destination. Freight costs of $320 were paid in cash.

Ace would report net cash inflow from operating activities on its statement of cash flows of

$(9,800)

$(10,120)

$2,880

$3,200

$(9,800)

$(10,120)

$2,880

$3,200

Explanation / Answer

Calculation of net Cash Inflow from Operating Activities

Sales

$13000

Inventory Cost

$10000

Less Discount @ 2% as Payment is made with in 10 days

$200

$9800

Freight on Sales

$320

Total Cost

$10120

Net Cash Flow from Operating Activities

$2880

So the Answer is C