Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full for the merchandise 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

Question

Quizplus · Accepted Answer

The net profit is $3,000 ($10,000 sale - $7,000 cost). However, since the customer has not paid yet, the cash flow is -$7,000 (outflow of $7,000 for the cost of merchandise, but no inflow of cash from the sale yet). Therefore, the correct answer is choice B.