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 no5-a. 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? 5-b. What does this adjustment represent? Cash collected from customers > Credit sales Cash payments > Cash collected Cash collected from customers < Credit sales 6-a. If the company debited cost of goods sold and credited inventory for $680,000 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? 6-c. What does the amount of these debits represent? Supplier payments Sales Cash collections Purchases References7-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? 7-b. What does this amount represent? Cash paid to suppliers < Cost of goods sold Cash paid to suppliers > Purchases Cash paid to suppliers > Cost of goods sold 8-a. If the company debited income tax expense and credited income taxes payable $1,270 during the year, what is the total amount of the debits recorded in the Income Taxes Payable account? 8-b. What does the amount of these debits represent? Taxes payable Tax refunds Cash paid for income taxes

Answer 1

5-a.

Amount	Direction
$5,300	+

b. Cash collected from customers > Credit sales

6-a. Inventory purchases: $688300

b. Debits in Accounts Payable T-account: $730600

c. Supplier payments

Inventory
Beg. Bal.	85000
Inv. Purchases	688300	680000
End. Bal.	93300
Accounts Payable
Beg. Bal.		96700
Payments	730600	688300	Inv. Purchases
End. Bal.		54400

7-a.

	Amount	Direction
Inventory	$         8,300	-
Accounts payable	$       42,300	-
Combined	$       50,600	-

b. Cash paid to suppliers > Cost of goods sold

8-a. Debits in Income Taxes Payable account: $13070

b. Cash paid for income taxes

Income Taxes Payable
Beg. Bal.		54100
Payments	13070	1270	Income tax expense
End. Bal.		42300