Question
Emphasis on Cash Flows: Worldwide Rugs is a rug importer located in the United States that resells its import products to local retailers. Last year
Emphasis on Cash Flows: Worldwide Rugs is a rug importer located in the United States that
resells its import products to local retailers. Last year Worldwide Rugs imported $2.5 million
worth of rugs from around the world, all of which were paid for prior to shipping. On receipt of
the rugs, the importer immediately resold them to local retailers for $3 million. To allow its retail
clients time to resell the rugs,
Worldwide Rugs sells to retailers on credit. Prior to the end of its business year, Worldwide Rugs
collected 85% of its outstanding accounts receivable.
b. Did Worldwide Rugs have a successful year from an accounting perspective?
Hint: Use the table below.
Accounting View (accrual basis)
Worldwide Rugs cash flow statement for the year ended 12/31
Sales revenue $?
Less: Costs ?
Net profit $?
Financial View (cash basis) Worldwide Rugs income statementfor the year ended 12/31
Cash inflow $?
Less: Cash outflow ?
Net cash flow $?
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