Question

During 2018, Hardy Merchandising Company purchased $19,000 of inventory on account. Hardy sold inventory on account that cost $14,300 for $21,400. Cash payments on accounts payable were $11,900. There was $19,000 cash collected from accounts receivable. Hardy also paid $3,900 cash for operating expenses. Assume that Hardy started the accounting period with $22,500 in both cash and common stock.

Required:

a. Record the events in a horizontal statement model. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. What is the balance of accounts receivable at the end of 2018?
b. What is the balance of accounts payable at the end of 2016?
c. What are the amounts of gross margin and net income for 2016?
d. Determine the amount of net cash flow from operating activities. (Indicate cash outflows with minus sign.)

Answer 1

a-

[Find solution in the attachment]

a- 2)

Balance of accounts receivable at the end of 2018 = $2,400

Solution b:

Balance of accounts payable at the end of 2018 = $7,100

Solution c:

Gross margin = Sales - COGS = $21,400 - $14,300 = $7,100

Net Income = Gross margin - Operating expenses = $7,100 - $3,900 = $3,200

Solution d:

Cash flow from operating activities = Cash received from customer - Cash paid for accounts payable - Cash paid for operating expenses = $19,000 - $11,900 - $3,900 = $3,200