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 $ 85,600 $ 102,500 Accounts receivable 69,500 74,800 Inventory 93,300 85,000 Total current assets 248,400 262,300 Property, plant, and equipment 249,000 238,000 Less accumulated depreciation 83,000 59,500 Net property, plant, and equipment 166,000 178,500 Total assets $ 414,400 $ 440,800 Accounts payable $ 54,400 $ 96,700 Income taxes payable 42,300 54,100 Bonds payable 102,000 85,000 Common stock 119,000 102,000 Retained earnings 96,700 103,000 Total liabilities and stockholders’ equity $ 414,400 $ 440,800 During the year, Ravenna paid a $10,200 cash dividend and it sold a piece of equipment for $5,100 that had originally cost $11,400 and had accumulated depreciation of $7,600. The company did not retire any bonds or repurchase any of its own common stock during the year. . What net income would the company include on its statement of cash flows? . How much depreciation would the company add to net income on its statement of cash flows? 4-a. If the company debited Accounts Receivable and credited Sales for $1,020,000 during the year, what is the total amount of credits recorded in Accounts Receivable during the year? 4-b. What does the amount of these credits represent? Cash sales Payment to suppliers Total sales Credit sales Cash collections from customers

Answer 1

Solution 1:

Net Income to be included in statement of cash flows = Ending retained earnings - Beginning retained earnings + Dividend paid

= $96,700 - $103,000 + $10,200 = $3,900

solution 2:

Depreciation taht company add to net income on itst statement of cash flows = Ending accumulated depreciation - Beginning accumulated depreciation + Accumulated depreciation on equipment sold

= $83,000 - $59,500 + $7,600 = $31,100

Solution 4a:

Total amount of credits recorded in accounts receivables during the year = Beginning accounts receivables + Sales - Ending accounts receivables

= $74,800 + $1,020,000 - $69,500 = $1,025,300

Solution 4b:

These credits represent "Cash collections from customers"