The Following Income Statement and Additional Information for MDB, Inc

question 35

Essay

The following income statement and additional information for MDB, Inc. is relevant to the statement of changes in financial position. $\begin{array} { | l | l | l | l | } \hline & \text { Income Statement } & \text { Additional Information } & \\\hline \text { Sales } & \$ 500,000 & \text { Increase in Acct/Rec } & \$ 10,000 \\\hline \text { Cost of goods sold } & ( 300,000 ) & \text { Increase in Inventory } & \$ 5,000 \\\hline \text { Operating expenses } & ( 140,000 ) & \text { Decrease in Acct/Pay } & \$ 8,000 \\\hline \text { Net income } & 60,000 & \text { Increase in Accrued Oper. Exps } & \$ 6,000 \\\hline\end{array}$ Required:
1. Prepare a schedule showing cash from operations (direct method).
2. Prepare a schedule showing cash from operations (indirect method).

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Definitions:

Reorder Period

The time interval between placing orders for inventory replenishment to ensure consistent supply without incurring stockouts or excessive holding costs.

Safety Stock

Inventory kept on hand to protect against fluctuations in demand or supply, ensuring that there are sufficient units available to meet customer needs.

Reorder Period

The time interval between placing orders for supplies or inventory to replenish stock.