Screenshot 2019-05-16 12.25.05.png - 9 P1-2(similar to Emma a Accrual income versus cash flow for a period Thomas Book Sales Inc supplies textbooks to

Screenshot 2019-05-16 12.25.05.png - 9 P1-2(similar to Emma...

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Unformatted text preview: 9) P1-2 (similar to) Emma, a Accrual income versus cash flow for a period. Thomas Book Sales, Inc., supplies textbooks to college and university bookstores. The books are shipped with a proviso that they must be paid for within 30 days but can be returned for a full refund credit within 90 days. In 2014, Thomas shipped and billed book titles totaling $790,000. Collections, net of return credits, during the year totaled $720,410. The company spent $323,504 acquiring the books that it shipped. 3. Using accmal accounting and the preceding values, show the firm's net profit for the past year. b. Using cash accounting and the preceding values, show the finn's net cash flow for the past year. c. Which of these statements is more useful to the financial manager? Why? Accounting View (accrual basis) Thomas Book Sales, Inc. Income Statement for the Year Ended 12131 Sales revenue 5 790000 Less: Costs 323504 Net profit $ 466496 b. Using cash accounting and the preceding values, show the firm's net cash flow for the past year in the following table. (Round to the nearest dollar.) Financial View (cash basis) Thomas Book Sales, Inc. Cash Flow Statement for the Year Ended 12131 Cash inflow $ 720410 Less: Cash outflow 323504 Net cash flow $ 396906 c. Which is more useful to the financial manager? (Select the best answer below.) A. The income statement because it recognizes revenues at the time of sale (whether payment has been received or not) and recognizes expenses when they are incurred. B. The cash flow statement because it recognizes revenues at the time of sale (whether payment has been received or not) and recognizes expenses when they are incurred. C. The income statement because it recognizes amounts that will not be collected and, as a result, will not contribute to the wealth of the owners. 3 D. The cash flow statement because it recognizes amounts that will not be collected and, as a result, will not contribute to the wealth of the owners. ...
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