Fay Stocks sells oriental rugs. She uses the FIFO method of inventory costing. The inventory available for

Question:

Fay sells oriental rugs. She uses the FIFO method of inventory costing. The inventory available for sale for a particular style of rug is as follows:

Fay Stocks sells oriental rugs. She uses the FIFO method

On July 31, a wealthy customer purchases three rugs paying $2,600 for each. Fay immediately replaces those rugs with three new rugs at a cost of $2,300 apiece. In addition, Fay immediately pays income tax on the sale at a rate of 40%. (Assume that she has no other expenses.) What is Fay€™s net income (after taxes) from the sale of the rugs? What is Fay€™s net cash flow from the sale of the rugs, the payment of income taxes, and the subsequent purchase of three new rugs? Why is there a substantial difference between net income and cash flow? What other circumstances can lead to differences like those illustrated in thiscase?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...