A firm has just ended its calendar year making a sale in the amount of $150,000 of merchandisepurchased during the year at a total cost of $112,500. Although the firm paid in full for themerchandise 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) $37,500 and -$112,500 respectively.
B) $150,000 and $112,500 respectively.
C) $0 and $150,000 respectively.
D) $37,500 and -$150,000 respectively.

Question

Quizplus · Accepted Answer

The net profit from the sale is calculated as the sales revenue ($150,000) minus the cost of goods sold ($112,500), which equals $37,500. However, since the firm has not yet collected the payment from the customer, there is no cash inflow, resulting in a cash flow of -$112,500. Therefore, the correct answer is A.

A Firm Has Just Ended Its Calendar Year Making a Sale