Question
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
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 | $ | 102,000 | $ | 122,400 | |
Accounts receivable | 81,700 | 88,000 | |||
Inventory | 109,700 | 100,000 | |||
Total current assets | 293,400 | 310,400 | |||
Property, plant, and equipment | 291,000 | 280,000 | |||
Less accumulated depreciation | 97,000 | 70,000 | |||
Net property, plant, and equipment | 194,000 | 210,000 | |||
Total assets | $ | 487,400 | $ | 520,400 | |
Accounts payable | $ | 64,000 | $ | 113,700 | |
Income taxes payable | 49,700 | 65,700 | |||
Bonds payable | 120,000 | 100,000 | |||
Common stock | 140,000 | 120,000 | |||
Retained earnings | 113,700 | 121,000 | |||
Total liabilities and stockholders equity | $ | 487,400 | $ | 520,400 | |
During the year, Ravenna paid a $12,000 cash dividend and it sold a piece of equipment for $6,000 that had originally cost $13,800 and had accumulated depreciation of $9,200. The company did not retire any bonds or repurchase any of its own common stock during the year.
8-a. If the company debited income tax expense and credited income taxes payable $1,510 during the year, what is the total amount of the debits recorded in the Income Taxes Payable account?
8-b. What does the amount of these debits represent?
9-a. 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?
9-b. What does this adjustment represent
10. Would the operating activities section of the companys statement of cash flows contain an adjustment for a gain or a loss? What would be the amount and direction (+ or ) of the adjustment?
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