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Assume the perpetual inventory method is used.
1)The company purchased $12,500 of merchandise on account under terms 2/10,n/30.
2)The company returned $1,200 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 $18,800 cash.
-The net cash flow from operating activities as a result of the four transactions is:

Question

Use the following for questions 
Assume the perpetual inventory method is used.
1)The company purchased $12,500 of merchandise on account under terms 2/10,n/30.
2)The company returned $1,200 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 $18,800 cash.
-The net cash flow from operating activities as a result of the four transactions is:

Quizplus · Accepted Answer

The correct answer is A because the net cash flow from operating activities is calculated as follows:Sales revenue: $18,800Less: Cost of goods sold: $12,500 - $1,200 = $11,300Gross profit: $7,500Less: Discount on purchases: $12,500 x 2% = $250Net cash flow from operating activities: $7,500 - $250 = $7,250

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