Question

Q-01: Thomas Book Sales, Inc., supplies textbooks to college and university bookstores. The books are shipped with a proviso that they must be paid for within 30 days but can be returned for a full refund credit within 90 days. In 2003, Thomas shipped and billed book titles totaling $760,000. Collections, net of return credits, during the year totaled $690,000. The company spent $300,000 acquiring the books that it shipped. a. Using accrual accounting and the preceding values, show the firm’s net profit for the past year. b. Using cash accounting and the preceding values, show the firm’s net cash flow for the past year. c. Which of these statements is more useful to the financial manager? Why?

Answer 1

Following are the solution to the given question:

Step-by-step explanation:

For point a:

Total profit =Sales- solding goods cost

`=760,000-300,000\\\\=TK.460,000`

For point b:

Total Cash flow =Cash receipts-solding goods cost

`=6,90,000-3,00,000\\\\=3,90,000`

For point c:

The financial management's cash flow report is much more helpful, its net cash flow contains monies that are not collected also, therefore, do not contribute to the owners' assets as a result.