Ravenna Company is a merchandiser that uses the indirect method to prepare the o
ID: 2474870 • 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 Beginning Balance Cash $ 69,200 $ 82,600 Accounts receivable 57,300 61,600 Inventory 76,900 70,000 Total current assets 203,400 214,200 Property, plant, and equipment 207,000 196,000 Less accumulated depreciation 69,000 49,000 Net property, plant, and equipment 138,000 147,000 Total assets $ 341,400 $ 361,200 Accounts payable $ 44,800 $ 79,700 Income taxes payable 34,900 42,500 Bonds payable 84,000 70,000 Common stock 98,000 84,000 Retained earnings 79,700 85,000 Total liabilities and stockholders’ equity $ 341,400 $ 361,200 During the year, Ravenna paid a $8,400 cash dividend and it sold a piece of equipment for $4,200 that had originally cost $9,000 and had accumulated depreciation of $6,000. The company did not retire any bonds or repurchase any of its own common stock during the year.
If the company debited cost of goods sold and credited inventory for $560,000 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?
6-b
What is the total amount of the debits recorded in the Accounts Payable T-account during the year?
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?
If the company debited income tax expense and credited income taxes payable $1,030 during the year, what is the total amount of the debits recorded in the Income Taxes Payable account?
6-a.If the company debited cost of goods sold and credited inventory for $560,000 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?
Explanation / Answer
1
Calculation of 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
Inventory Ending Balance
$ 69,200
Add: Cost of Good sold
$560,000
Less: Inventory Beginning Balance
$ (82,600)
Total amount of inventory purchases
$546,600
2
Calculation of total amount of the debits recorded in the Accounts Payable T-account during the year:
Beginning Accounts payable
$ 79,700
Add: Total amount of inventory purchases
$546,600
Less: Ending Accounts payable
$ (44,800)
Total amount of the debits recorded in the Accounts Payable
$581,500
3
Calculation of 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:
Inventory Ending Balance
$ 69,200
Inventory Beginning Balance
$ 82,600
Decrease in inventory (A)
$ 13,400
Beginning Accounts payable
$ 79,700
Ending Accounts payable
$ 44,800
Decrease in Accounts Payable (B)
$ 34,900
Adjustments to net income in the operating activities section of the statement of cash flows:
Add: Decrease in inventory (A)
$ 13,400
Less: Decrease in Accounts Payable (B)
$ (34,900)
Combined amount and direction (+ or ) of the inventory and accounts payable adjustments
$ (21,500)
4
Calculation of total amount of the debits recorded in the Income Taxes Payable account:
Beginning Income taxes payable
$ 42,500
Add: Income tax expense
$ 1,030
Less: Ending Income taxes payable
$ (34,900)
Total amount of the debits recorded in the Income Taxes Payable account
$ 8,630
1
Calculation of 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
Inventory Ending Balance
$ 69,200
Add: Cost of Good sold
$560,000
Less: Inventory Beginning Balance
$ (82,600)
Total amount of inventory purchases
$546,600
2
Calculation of total amount of the debits recorded in the Accounts Payable T-account during the year:
Beginning Accounts payable
$ 79,700
Add: Total amount of inventory purchases
$546,600
Less: Ending Accounts payable
$ (44,800)
Total amount of the debits recorded in the Accounts Payable
$581,500
3
Calculation of 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:
Inventory Ending Balance
$ 69,200
Inventory Beginning Balance
$ 82,600
Decrease in inventory (A)
$ 13,400
Beginning Accounts payable
$ 79,700
Ending Accounts payable
$ 44,800
Decrease in Accounts Payable (B)
$ 34,900
Adjustments to net income in the operating activities section of the statement of cash flows:
Add: Decrease in inventory (A)
$ 13,400
Less: Decrease in Accounts Payable (B)
$ (34,900)
Combined amount and direction (+ or ) of the inventory and accounts payable adjustments
$ (21,500)
4
Calculation of total amount of the debits recorded in the Income Taxes Payable account:
Beginning Income taxes payable
$ 42,500
Add: Income tax expense
$ 1,030
Less: Ending Income taxes payable
$ (34,900)
Total amount of the debits recorded in the Income Taxes Payable account
$ 8,630
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