Newark Company Has Provided the Following Information: • Cash Sales

question 63

Multiple Choice

Newark Company has provided the following information: • Cash sales, $450,000
• Credit sales, $1,350,000
• Selling and administrative expenses, $330,000
• Sales returns and allowances, $90,000
• Gross profit, $1,360,000
• Increase in accounts receivable, $55,000
• Bad debt expense, $33,000
• Sales discounts, $43,000
• Net income, $1,030,000
What is the effect of collections from customers on cash flow from operating activities, using the indirect method?

• A)Cash flow increased $975,000.
• B)Cash flow increased $395,000.
• C)Cash flow decreased $55,000.
• D)Cash flow increased $450,000.

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Definitions:

Marginal Cost

The price associated with the creation of one more unit of a product or service.

Average Total Cost

The per-unit cost of production, calculated by dividing the total cost of production by the quantity of output produced.

Economic Profit

The difference between the total revenue generated by a business and the total costs, including both explicit and implicit costs.

Short-run Marginal Cost Curve

A curve that shows the change in total cost associated with producing one more unit of output in the short term.