Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending Balance Beginning Balance Cash and cash equivalents $ 48,000 $ 57,000 Accounts receivable Inventory Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Total assets 100,000 105,000 $244,000 $256,000 41,000 44,000 55,000 50,000 144,000 151,000 150,000 140,000 50,000 35,000 Accounts payable Income taxes payable Bonds payable Common stock Retained earnings $ 32,000 $ 57,000 25,000 28,000 60,000 50,000 70,000 60,000 57,000 61,000 Total liabilities and stockholders' equity $244,000 $256,000 During the year, Ravenna paid a $6,000 cash dividend and it sold a piece of equipment for $3,000 that had originally cost $6,000 Page 718 and had accumulated depreciation of $4,000. The company did not retire any bonds or repurchase any of its own common stock during the year. Required: 1. What is the amount of the net increase or decrease in cash and cash equivalents that would be shown on the company's statement of cash flows? 2. What net income would the company include on its statement of cash flows? 3. How much depreciation would the company add to net income on its statement of cash flows? 4. (To help answer this question, create an Accounts Receivable T-account and insert the beginning and ending balances.) If the company debited Accounts Receivable and credited Sales for $600,000 during the year, what is the total amount of credits recorded in Accounts Receivable during the year? What does the amount of these credits represent? 5. What is the amount and direction (+ or -) of the accounts receivable adjustment to net income in the operating activities section of the statement of cash flows? What does this adjustment represent? 6. (To help answer this question, create T-accounts for Inventory and Accounts Payable and insert their beginning and ending balances.) If the company debited Cost of Goods Sold and credited Inventory for $400,000 during the year, what is the total amount of inventory purchases recorded on the debit side of the Inventory T-account and the credit side of the Accounts Payable T-account? What is the total amount of the debits recorded in the Accounts Payable T-account during the year? What does the amount of these debits represent? 7. What is the combined amount and direction (+ or -) of the inventory and accounts payable adjustments to net income in the operating activities section of the statement of cash flows? What does this amount represent? 8. (To help answer this question, create an Income Taxes Payable T-account and insert the beginning and ending balances.) If the company debited Income Tax Expense and credited Income Taxes Payable $700 during the year, what is the total amount of the debits recorded in the Income Taxes Payable account? What does the amount of these debits represent? 9. What is the amount and direction (+ or -) of the income taxes payable adjustment to net income in the operating activities section of the statement of cash flows? What does this adjustment represent? 10. Would the operating activities section of the company's statement of cash flows contain an adjustment for a gain or a loss? What would be the amount and direction (+ or -) of the adjustment? 11. What is the amount of net cash provided by operating activities in the company's statement of cash flows? 12. What is the amount of gross cash outflows reported in the investing section of the company's statement of cash flows? 13. What is the company's net cash provided by (used in) investing activities? 14. What is the amount of gross cash inflows reported in the financing section of the company's statement of cash flows? 15. What is the company's net cash provided by (used in) financing activities? Page 719