Dino's Italian Grille purchased $6,000 of napkins for its business.One-fourth of the bill is unpaid.Upon review of the napkins still on hand,20% were still available.What combination of amounts would affect the income statement and statement of cash flows? Statement of Cash Flow Income Statement

Question

Quizplus · Accepted Answer

Option A is incorrect because the full $6,000 purchase amount affects the cash flow statement, and the full amount also affects the income statement, resulting in double-counting the expense.

Option B is incorrect because only 75% of the purchase amount affects the cash flow statement, and the full amount affects the income statement, resulting in double-counting the expense.

Option D is incorrect because a portion of the purchase amount is unpaid, which means that only the portion paid affects the cash flow statement. The full purchase amount still affects the income statement, resulting in double-counting the expense.

Option C is correct because only the portion paid (80% of $6,000 = $4,800) affects the cash flow statement, and only the portion on hand (20% of $6,000 = $1,200) affects the income statement. This is the best choice to avoid double-counting the expense.

Dino's Italian Grille Purchased $6,000 of Napkins for Its Business