The income statement of Paxson Company is presented here. PAXSON COMPANY Income

ID: 2491334 • Letter: T

Question

The income statement of Paxson Company is presented here.

PAXSON COMPANY Income Statement For the Year Ended November 30, 2014 Sales revenue $7,600,000 Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory $1,900,000 4,400,000 6,300,000 1,600,000 Total cost of goods sold Gross profit Operating expenses 4,700,000 2,900,000 Selling expenses Administrative expenses 450,000 700,000 1,150,000 $1,750,000 Net income Additional information: 1. Accounts receivable decreased $380,000 during the year, and inventory decreased $300,000 2. Prepaid expenses increased $150,000 during the year 3. Accounts payable to suppliers of merchandise decreased $350,000 during the year, 4. Accrued expenses payable decreased $100,000 during the year 5. Administrative expenses include depreciation expense of $110,000

Explanation / Answer

Cash from operating activities

Cash received from customers

(7,600,000 + 380,000) 7,980,000

Less:

Cash paid to suppliers

( cost of goods sold 4,700,000 – decrease in inventory

300,000 + decrease in account payable 350,000 (4,750,000)

Cash paid for expense

Operating expense 1,150,000 – depreciation expense

110,000 + prepaid expense increase 150,000 +

Accrued expense payable 100,000) (1,290,000)

Cash from operating expense 1,940,000