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Consider the following transactions pertaining to Retail Traders Company. Amounts in parentheses indicate a decrease in the account. Assets = Liabilities + Owners Equity Explanation
Consider the following transactions pertaining to Retail Traders Company. Amounts in parentheses indicate a decrease in the account.
| Assets | = | Liabilities | + | Owners Equity |
Explanation | Cash | Inventory | Accounts Payable | Common Stock | Retained Earnings |
Beginning Balance |
| $10,000 | $ 5,000 | $3,000 | $ 2,000 |
Credit purchases |
| 100,000 | 100,000 |
|
|
Cash sales | $115,000 |
|
|
| 115,000 |
Cost of goods sold |
| (90,000) |
|
| (90,000) |
Cash paid to supporters | (85,000) |
| (85,000) |
|
|
Ending balance | $30,000 | $20,000 | $20,000 | $3,000 | $27,000 |
Required:
- Prepare an income statement
- Prepare a direct method cash flow statement
- Prepare an indirect method cash flow statement
- Provide an intuitive explanation of how the adjustments made to net income in the indirect method cash flow statement convert the accrual numbers to cash flow numbers.
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