Question

Thomas Book Sales, Inc., supplies textbooks to college and university bookstores. The books are shipped with a proviso that they must be paid for within 30 days but can be returned for a full refund credit within 90 days. In 2014, Thomas shipped and billed book titles totaling $660,000. Collections, net of return credits, during the year totaled $605,934. he company spent $255,453 acquiring the books that it shipped a. Using accrual accounting and the preceding values, show the firm's net profit for the past year b. Using cash accounting and the preceding values, show the firm's net cash flow for the past year c. Which of these statements is more useful to the financil manager? Why?

Answer 1

Answer:

The following summarizes the solution to the given problem.

Explanation:

The given values are:

Sales,

= $660,000

Expenses,

= $255,453

Received cash revenues,

= $605,934

(a)

According to the accrual, profits would be acknowledged and therefore not necessarily received on the occasion of purchase.

⇒ $Net \ income=Sales-Expense$

On substituting the given values, we get

⇒                     $=660,000-255,453$

⇒                     $=404,547$ ($)

(b)

⇒ $Net \ Income =Received \ cash \ revenues-Expenses$

On substituting the given values, we get

⇒                     $=605,934-255,453$

⇒                     $=350,481$ ($)

(c)

• The reliable financial foundation again for a financial consultant is more helpful because it demonstrates or represents the organization's appropriate financial status.
• It accepts the profits throughout a similar time frame.