5. What is the amount and direction (+ or ?) of the accounts receivable adjustme

Question

5. 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?

6. If the company debited cost of goods sold and credited inventory for $880,000 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?

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

8. 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. If the company debited income tax expense and credited income taxes payable $1,660 during the year, what is the total amount of the debits recorded in the Income Taxes Payable account?

10. 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?

Explanation / Answer

5) Accounts receivable has been reduced from $96800 to $89800. The difference of (96800 - 89800) i.e. $ $7000 should be Added (+) to the Net income in the Operating Activities to arrive at the Cash Flow from Operation.

6)

If the company debited cost of goods sold and credited inventory for $880,000 during the year, 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 is $890600

7) As shown above, the total amount of the debits recorded in the Accounts Payable T-account during the year

= $ 945200, representing the payment for inventory.

8) 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:

Increase in Inventory = $120600 - $110000 = $10600

Decrease in Accounts payable = $125000 - $70400 = $54600

Both will be deducted from net income in the operating activies section to arrive at the operating cash flow.

So direction of the combined balance $65200 is "-"

9)

If the company debited income tax expense and credited income taxes payable $1,660 during the year, the total amount of the debits recorded in the Income Taxes Payable account is $21460 representing the payment of income tax

10) The decrease in income tax payable by $ 19800 will be deducted from the net income to arrive at the cash flow from operating activities. So the direction of adjustment is "-"

Accounts Payable Date particulars amount Date particulars amount Cash 945200 Balance c/d 125000 Balance c/f 70400 Inventory 890600 1015600 1015600 Inventory Date particulars amount Date particulars amount Balance c/d 110000 Cost of goods sold 880000 Accounts Payable 890600 Balance c/d 120600 1000600 1000600

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