Question
2. For each transaction below, write the net effect on Current Assets (CA), Current Liabilities (CL), Gross Profit (GP), Net Income Before Taxes (NIBT),
2. For each transaction below, write the net effect on Current Assets (CA), Current Liabilities (CL), Gross Profit (GP), Net Income Before Taxes (NIBT), and Cash flows from operating activities (CFO). (10 points; 0.25 per entry) Ignore income tax effects Write only the effect for the current period. Assume the company is a merchandising firm. Assume warranty expenses are recognized in COGS and bad debt expenses are recognized in SG&A. If the net effect is negative, include a negative sign. If no effect, write 0. Note that this is not a balance sheet equation (A L+E) table, so you should not expect amounts to balance. + CA CL GP -25 0 NI (pretax) CFO 0 -25 Transaction Ex Pay $25 of rent payable covering last quarter's electrical bill -25 A Recognize bad debt expense of $85 B Write off $22 of Accounts Receivable C Recognize warranty expense of $35 D Pay $15 to satisfy warranties previously accrued E Pay $200 for the next 4 months' rent (not this month) Recognize $50 inventory impairment (expense in COGS) F G Purchase $99 of inventory on account H Collect $72 of Accounts receivable
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