Question

Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. The net profit and cash flow from this sale for the year are
(a) $3,000 and $10,000, respectively.
(b) $3,000 and –$7,000, respectively.
(c) $7,000 and –$3,000, respectively.
(d) $3,000 and $7,000, respectively

Answer 1

Answer:

The correct option is B

Explanation:

The company made a sale of $10,000, which is purchased at a cost of $7,000. So, the company will have a profit which is computed as:

Net Profit = Sale Price - Cost Price

= $10,000 - $7,000

= $3,000

Therefore, had a profit of $3,000 from sale.

And the made a sale for which the company received amount of $7,000. The amount of $7,000 is the cash flow from the sale.