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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 $ 48,000   $ 57,000  
  Accounts receivable
41,000  
44,000  
  Inventory
55,000  
50,000  
  Property, plant, and equipment
150,000  
140,000  
  Less accumulated depreciation
(50,000)
(35,000)
  



  Total assets $ 244,000   $ 256,000  
  



  Accounts payable $ 32,000   $ 57,000  
  Income taxes payable
25,000  
28,000  
  Bonds payable
60,000  
50,000  
  Common stock
70,000  
60,000  
  Retained earnings
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 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:
a.

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?
  Purchases $   
b-1.

What is the total amount of the debits recorded in the Accounts Payable T-account during the year?
  Total amount of debits recorded $   
b-2.

What does the amount of these debits represent?




Purchases

Supplier payments

Cash collections

Sales

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M9948981

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