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	$	64,400		$	76,900
Accounts receivable		53,200			57,200
Inventory		71,400			65,000
Total current assets		189,000			199,100
Property, plant, and equipment		192,000			182,000
Less accumulated depreciation		64,000			45,500
Net property, plant, and equipment		128,000			136,500
Total assets	$	317,000		$	335,600
Accounts payable	$	41,600		$	74,000
Income taxes payable		32,400			39,600
Bonds payable		78,000			65,000
Common stock		91,000			78,000
Retained earnings		74,000			79,000
Total liabilities and stockholders equity	$	317,000		$	335,600

During the year, Ravenna paid a $7,800 cash dividend and it sold a piece of equipment for $3,900 that had originally cost $8,400 and had accumulated depreciation of $5,600. 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 companys 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-a. If the company debited Accounts Receivable and credited Sales for $780,000 during the year, what is the total amount of credits recorded in Accounts Receivable during the year?

4-b. What does the amount of these credits represent?

Item 5

Part 5 of 15

2 points

Item 5

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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	$	64,400		$	76,900
Accounts receivable		53,200			57,200
Inventory		71,400			65,000
Total current assets		189,000			199,100
Property, plant, and equipment		192,000			182,000
Less accumulated depreciation		64,000			45,500
Net property, plant, and equipment		128,000			136,500
Total assets	$	317,000		$	335,600
Accounts payable	$	41,600		$	74,000
Income taxes payable		32,400			39,600
Bonds payable		78,000			65,000
Common stock		91,000			78,000
Retained earnings		74,000			79,000
Total liabilities and stockholders equity	$	317,000		$	335,600

During the year, Ravenna paid a $7,800 cash dividend and it sold a piece of equipment for $3,900 that had originally cost $8,400 and had accumulated depreciation of $5,600. The company did not retire any bonds or repurchase any of its own common stock during the year.

5-a. 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?

5-b. What does this adjustment represent?