Effects of transactions involving suppliers and customers on cash flows. Refer to the excerpts from the accounting records of Home and Office Depot in Exhibit 6.8. These are the balances in various accounts at the beginning and the end of the year. The amounts shown for sales revenue, bad debt expense, and cost of merchandise sold are their income statement amounts for the year. Home and Office Depot deals with

• many retail customers, some of whom have not paid for goods they have purchased, and

• man\ suppliers of goods, some of whom the firm has paid for orders not yet received and some of whom have delivered goods for which the firm has not yet paid.

EXHIBIT 6.8 HOME RND OFFICE DEPOT Selected Details from Financial Statements For the Current Year (Exercise 25)

Beginning of Year End of Year PARTIAL BALANCE SHEETS Accounts Receivable from Retail Customers $ 8,000 $ 8,600 Less Allowance for Uncollectible Retail Receivables (700) (750)

Advances to Suppliers of Retail Merchandise 10,000 10,400 Inventory of Retail Merchandise 11,000 11,200 Total Assets $28,300 $ 29,450 Accounts Payable to Suppliers of Retail Merchandise 7,000 7,500 All Other Accounts (Net) 21,300 21,950 Totals $28,300 $ 29,450 PARTIAL INCOME STATEMENT FOR THE CURRENT YEAR Sales Revenue from Retail Customers 130,000 Bad Debt Expense 2,000 Cost of Retail Merchandise Sold 85,000 Less: Total Expenses (87,000)

Income $ 63,000 Home and Office Depot settles all its accounts with customers and suppliers with cash, never with noncash assets.

a. Calculate the amount of cash the firm received from its customers during the year.

b. Calculate the amount of cash the firm paid to its suppliers of retail merchandise during the year.