Assume zero opening balances for all balance sheet accounts. -Credit sales of $100 000,of which $80 000 was received at year end
-Paid wages of $40 000
-Depreciation expenses was $8000
Net profit and cash flow from operations are respectively?

Question

Quizplus · Accepted Answer

- Credit sales of $100 000 will increase accounts receivable by $100 000. 
- Of the $100 000 credit sales, $80 000 was received, so $20 000 remains as an accounts receivable at year end. 
- Paid wages of $40 000 will decrease cash by $40 000. 
- Depreciation expense of $8 000 reduces net income by $8 000.

Therefore, net profit = $100 000 - $40 000 - $8 000 = $52 000, and cash flow from operations = $80 000 - $40 000 = $40 000.

Assume Zero Opening Balances for All Balance Sheet Accounts