The change in each of Kendall Corporation\'s balance sheet accounts last year fo
ID: 2597926 • Letter: T
Question
The change in each of Kendall Corporation's balance sheet accounts last year follows:
Increase
Decrease
Cash
$3,000
Accounts Receivable
$2,000
Inventory
$3,000
Prepaid Expenses
$4,000
Long-term Investments
$15,000
Property, Plant and Equipment
$10,000
Accumulated Depreciation
$8,000
Accounts Payable
$9,000
Accrued Liabilities
$6,000
Bonds Payable
$13,000
Common Stock
$5,000
Retained Earnings
$4,000
Kendall Corporation's income statement for the year was:
Sales
$300,000
Cost of goods sold
180,000
Gross margin
120,000
Selling and administrative expense
116,000
Net income
$4,000
There were no sales or retirements of property, plant, and equipment and no dividends paid during the year. The company pays no income taxes and it did not purchase any long-term investments, issue any bonds payable, or repurchase any of its own common stock. The net cash provided by operating activities on the statement of cash flows is determined using the direct method.
Using the direct method, sales adjusted to a cash basis would be:
$300,000
$302,000
$298,000
$305,000
Increase
Decrease
Cash
$3,000
Accounts Receivable
$2,000
Inventory
$3,000
Prepaid Expenses
$4,000
Long-term Investments
$15,000
Property, Plant and Equipment
$10,000
Accumulated Depreciation
$8,000
Accounts Payable
$9,000
Accrued Liabilities
$6,000
Bonds Payable
$13,000
Common Stock
$5,000
Retained Earnings
$4,000
Explanation / Answer
Calculate direct method sales adjusted :
Cash sales = sales - increase in account receivable
= 300000-2000
Cash sales = 298000
So answer is c) 298000
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