Question

Assume the perpetual inventory system is used. 1) Green Company purchased merchandise inventory that cost $65,300 under terms of 2/10, n/30 and FOB shipping point. 2) Green Company paid freight cost of $2,530 to have the merchandise delivered. 3) Payment was made to the supplier on the inventory within 10 days. 4) All of the merchandise was sold to customers for $96,600 cash and delivered under terms FOB destination with freight cost amounting to $1,730. What is the net cash flow from operating activities that results from these transactions? show your detail calculation: Cash inflow and cash outflow

Answer 1

Based on the perpetual inventory system, the payment for inventory, and the freight costs, the net cash flow from operating activities is $28,346

How to find the net cash flow?

The net cash flow for Green Company from its various transactions and using the perpetual inventory system can be found by the formula:

= Cash inflow from sales to customers - Cash outflow for freight cost - Cash outflow for freight cost to customers - Cash outflow for payment to supplier in ten days

The net cash flow from operating activities is therefore:

= 96,600 - 2,530 - 1,730 - (65,300 x (100% - 2%))

= 96,600 - 2,530 - 1,730 - 63,994

= $28,346

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