Assume Beta Company uses the perpetual inventory method and engaged in the following transactions:
1) Purchased $5,000 of merchandise on account under terms 2/10, n/30.
2) Returned $600 (list price) of merchandise to the supplier before payment was made.
3) Paid the account payable within the discount period.
4) Sold the merchandise for $6,500 cash.
The net cash flow from operating activities as a result of the four transactions is:

Question

Quizplus · Accepted Answer

- Transaction 1: Increase in inventory and increase in accounts payable by $5,000 each.
- Transaction 2: Decrease in inventory and decrease in accounts payable by $600 each.
- Transaction 3: Payment was made within the discount period, so Beta Company receives a 2% discount on the purchase price of $5,000. The discount amount is $100 (2% of $5,000). The cash paid is $4,900 ($5,000 - $100).
- Transaction 4: Increase in cash by $6,500 and decrease in inventory by the cost of goods sold, which can be calculated as follows:
   - Cost of goods sold = Selling price - Gross profit = $6,500 - $5,000 (cost) = $1,500
Therefore, the net cash flow from operating activities is: 
($6,500 - $1,500) - $4,900 = $2,100. 
Thus, the correct answer is D.

Assume Beta Company Uses the Perpetual Inventory Method and Engaged