Question

flagler company purchased $4,000 of merchandise on account. flagler sold the merchandise to a customer for $7,000 cash. what is the increase in gross margin and the net change in cash flow from operating activities as a result of these transactions

Answer 1

The answer is:

Gross profit= $3,000

Net change in cash flow is the inflow of $7,000 to be collected from customers.

Step-by-step explanation:

Gross profit equals Revenue minus Cost of Sales.

Revenue is $7,000

Cost of sales is $4,000

Therefore, gross profit =

$7,000 - $4,000

=$3,000.

Net change in cash flow from operating activities will be the inflow of $7,000 that will be collected from customers.

Cash collected from customers is a line item in cash flow under operating activities section.