Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system.1)The company purchased $12,200 of merchandise on account under terms 2/10, n/30.2)The company returned $1,700 of merchandise to the supplier before payment was made.3)The liability was paid within the discount period.4)All of the merchandise purchased was sold for $18,400 cash.What is the net cash flow from operating activities as a result of the four transactions?

Question

Quizplus · Accepted Answer

The net cash flow from operating activities is calculated as follows: Purchase of merchandise ($12,200) minus return ($1,700) equals $10,500. Payment within discount period gives a 2% discount, so $10,500 * 0.98 = $10,290. Cash received from sales is $18,400. Therefore, net cash flow is $18,400 - $10,290 = $8,110.

Darlington Company Entered into the Following Business Events During Its