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

Quizplus · Accepted Answer

The net cash flow is the difference between the cash received from sales and the cash paid for purchases. In this case, the company received $18,800 from sales and paid $12,500 for purchases, resulting in a net cash flow of $6,300. However, the company also returned $1,200 of merchandise, which reduces the net cash flow to $5,100.

Assume the Perpetual Inventory Method Is Used