Use the Following Income Statement and Information About Selected Current

question 4

Essay

Use the following income statement and information about selected current assets and current liabilities to calculate the net cash provided or used by operating activities using the direct method.
$\begin{array}{c} \text { PETERS COMPANY } \\ \text { Income Statement } \\ \text { For Year Ended December 31, 2013 } \\\begin{array}{|l|r|r|}\hline \text { Sales } & & \$ 180,000 \\\hline \text { Cost of goods sold } & & 104,000 \\\hline \text { Gross profit from sales } & & \$ 76,000 \\\hline \text { Operating expenses: } & & \\\hline \text { Salaries and wages expense } & \$ 25,000 & \\\hline \text { Depreciation expense } & 5,000 & \\\hline \text { Rent expense } & 7,200 & \\\hline \text { Interest expense } & 1,900 & 39,100 \\\hline \text { Income from operations } & & \$ 36,900 \\\hline \text { Gain on sale of land } & & 2,000 \\\hline \text { Net income } & & 38,900 \\\hline\end{array}\end{array}$
Selected beginning and ending balances of current asset and current liability accounts, all of which relate to operating activities, are as follows:
$\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad{\text { Balance }} \\\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & \text { Dec. } 31,2013 & \text { Dec, } 31,2012 \\\hline \text { Merchandise inventory } & \$ 27,600 & \$ 24,000 \\\hline \text { Prepaid rent } & 18,200 & 20,000 \\\hline \text { Accounts payable } & 550 & 400 \\\hline \text { Salaries and wages payable } & 27,100 & 31,000 \\\hline \text { Interest payable } & 10,400 & 9,000 \\\hline\end{array}\end{array}$

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Definitions:

Indifference Curves

Graphical representations in microeconomics to show combinations of two goods that provide the consumer with the same level of satisfaction.

Price Rises

An increase in the cost of goods or services, affecting the buying behavior of consumers and potentially leading to changes in market dynamics.

Indifference Curves

Graphical representations in microeconomic theory that illustrate different combinations of two goods between which a consumer is indifferent in preference.

Optimal Consumption

The point at which an individual's utility from consuming goods and services is maximized, given their budget constraints.