Ravenna Company is a merchandiser that uses the indirect method to prepare the o
ID: 2475678 • 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 $13,800 cash dividend and it sold a piece of equipment for $6,900 that had originally cost $16,200 and had accumulated depreciation of $10,800. The company did not retire any bonds or repurchase any of its own common stock during the year.
1.
What is the amount of the net increase or decrease in cash and cash equivalents that would be shown on the company’s statement of cash flows?
2.
What net income would the company include on its statement of cash flows?
3.
How much depreciation would the company add to net income on its statement of cash flows?
4.
If the company debited Accounts Receivable and credited Sales for $1,350,000 during the year, what is the total amount of credits recorded in Accounts Receivable during the year?
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-a.
If the company debited cost of goods sold and credited inventory for $920,000 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?
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?
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
1
Calculation of amount of the net increase or decrease in cash and cash equivalents that would be shown on the company’s statement of cash flows.
Cash Ending Balance
$ 118,400
Cash Beginning Balance
$ 142,300
Amount of the net increase or decrease in cash and cash equivalents = 118400-142300 =
$ (23,900)
2
Calculation of net income the company would include on its statement of cash flows?
Ending Retained earnings
$ 130,700
Less: Beginning Retained earnings
$ (139,000)
Add: Cash Dividend
$ 13,800
Net income
$ 5,500
3
Calculation of depreciation that the company would add to net income on its statement of cash flows?
Accumulated depreciation ending balance
$ 111,000
Less: Accumulated depreciation beginning balance
$ (80,500)
Add: Acc. Dep. Of assets sold
$ 10,800
Depreciation in Cash flows statement
$ 41,300
4
Calculation of total amount of credits recorded in Accounts Receivable during the year If the company debited Accounts Receivable and credited Sales for $1,350,000 during the year
Accounts receivable beginning balance
$ 101,200
Add: Debited amount
$1,350,000
Less: Accounts receivable Ending balance
$ (93,900)
Total amount of credits recorded in Accounts Receivable during the year
$1,357,300
1
Calculation of amount of the net increase or decrease in cash and cash equivalents that would be shown on the company’s statement of cash flows.
Cash Ending Balance
$ 118,400
Cash Beginning Balance
$ 142,300
Amount of the net increase or decrease in cash and cash equivalents = 118400-142300 =
$ (23,900)
2
Calculation of net income the company would include on its statement of cash flows?
Ending Retained earnings
$ 130,700
Less: Beginning Retained earnings
$ (139,000)
Add: Cash Dividend
$ 13,800
Net income
$ 5,500
3
Calculation of depreciation that the company would add to net income on its statement of cash flows?
Accumulated depreciation ending balance
$ 111,000
Less: Accumulated depreciation beginning balance
$ (80,500)
Add: Acc. Dep. Of assets sold
$ 10,800
Depreciation in Cash flows statement
$ 41,300
4
Calculation of total amount of credits recorded in Accounts Receivable during the year If the company debited Accounts Receivable and credited Sales for $1,350,000 during the year
Accounts receivable beginning balance
$ 101,200
Add: Debited amount
$1,350,000
Less: Accounts receivable Ending balance
$ (93,900)
Total amount of credits recorded in Accounts Receivable during the year
$1,357,300
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