During 2018, Hardy Merchandising Company purchased $19,000 of inventory on account. Hardy sold inventory on account that cost $1
4,300 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.)
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.)
1 answer:
Answer:
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
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The complete question is as follows:
Dan owns an autographed copy of a Brittany Spears CD that he values at $100. If he sells the CD at the garage sale he’s planning to hold in a few weeks, it will be sold to a buyer with a reservation price of $175. If he sells it on eBay, it will be sold to a buyer with a reservation price of $500. eBay will charge Dan $50 to auction the CD, which just covers eBay’s opportunity cost of running the auction. Relative to selling the CD at his garage sale, auctioning the CD on eBay will lead:
A. to no change in total economic surplus.
B. total economic surplus to increase by $500.
C. total economic surplus to increase by $275.
D. total economic surplus to increase by $100.
Answer: C - Total economic surplus to increase by $275.
In this question, we only need to consider producers' surplus since we're considering the various options for Dan to sell his CD.
We calculate Producer's Surplus as follows:
Economic costs not only refers to explicit costs like cost of the CD, but also includes opportunity costs. Since we need to calculate producer's surplus when Dan sells on Ebay, we need to consider the following costs:
Value of the CD = $100
Ebay's opportunity cost that Dan will have to bear = $50
Among the three expenses listed above, the profit Dan would've got in the garage sale is considered the <u>implicit cost or opportunity cost.</u>
Substituting the values we have in the equation above, we get,