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Revenue $ 560,000, mark up % 33.33%, closing inventory $80,000 (an increase of 100% compared with the opening inventory), payables b/f $ 79,000, payables carried forward $160,000, receiveables b/f $62,000, receivabales c/f $59,500, bad debts written off during the year $ 3,500, allowance for receivables b/f $8,620,allowance for receivables c/f $ 15,200
how much cash was paid to the suppliers/payables in the year?
sorry, i totally have no idea how to approach this ‘mega question’.
any help would be much appreciatedThe extent of knowledge required about direct method cash flows is illustrated in the free course notes where there is a quick example.
Trust me here, there is no need to go further in to the topic than the illustration in those notes
answers:
a) 569000
b) 407000
c) 379000
d) 541000working:
payable b/f= 79000cost + profit = selling price
cost (100) + profit (33.33) = selling price (133.33)
profit = 560,000 * 33.33/133.33= 140000
cost = 560000-140000=420,000closing inventory 80,000
increased 100%, thus 40,000total purchase 460,000
credit side t balance 79,000+460,000=539,000
debit side c/f = 160,000
thus cash = $539000-$160,000=$379,000 (c)
am i right? so ignore the bad debts as it is for receivables calculation rightI’m not wasting my time answering this! I’ve already told you, it won’t come up!
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