Flax purchased $5,000 in equipment during 20X4. Flax allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses. What amounts should Flax report in its Statement of Cash Flows for the year ended December 31, 20X4, for cash paid for goods to be sold? $242,500 $257,500 $226,500 $258,500

Question

Business

Amir Middleton

18 December, 03:54

Flax purchased $5,000 in equipment during 20X4. Flax allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses. What amounts should Flax report in its Statement of Cash Flows for the year ended December 31, 20X4, for cash paid for goods to be sold? $242,500 $257,500 $226,500 $258,500

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Kylee Dudley · Answer 1

The financial statement missing from the question is found below:

Flax Corp. uses the direct method to prepare its Statement of Cash Flows. Flax's trial balances at December 31, 20X4 and 20X3, are as follows: Debits: Cash Accounts receivable Inventory Property, plant, & equipment December 31 20x4 20X3 33,000 30,000 $35,000 $32,000 33,000 30,000 31,000 47,000 100,000 4,500 5,000 250,000 380,000 141,500 172,000 137,000 151,300 2,600 20,400 61,200 $756,700 $976,100 Unamortized bond discount Cost of goods sold Selling expenses General & administrative expenses Interest expense Income tax expense Credits: Allowance for uncollectible accounts $1,100 Accumulated depreciation 15,000 $1,300 16,500 25,000 21,000 Trade accounts payable 17,500 Income taxes payable 27,100 Deferred income taxes 4,600 5,300 45,000 8% callable bonds payable 20,000 Common stock 50,000 40,000 7,500 Additional paid-in capital 9,100 Retained earnings 44,700 64,600 Sales 538,800 $756,700 778,700 $976,100 Flax purchased $5,000 in equipment during 20X4. Flax allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses. What amounts should Flax report in its Statement of Cash Flows for the year ended December 31, 20X4, for cash paid for goods to be sold? $242,500 $257,500 $258,500 $226,500

cash paid for goods to be sold is $226,500

Explanation:

Cash paid for goods to be sold is equals to cost of goods minus the reduction in inventory (opening stock minus closing stock) minus the increase in accounts payable (closing accounts payable minus opening accounts payable)

Cost of goods sold is $250,000 as highlighted which is shown in bold style in the question above.

Reduction in inventory = (47000-31000) = 16000

increase in accounts payable = 25000-17500=7500

cash for cost of goods sold=$250,000-$16,000-$7,500=$226,500

The correct option is the third option in the multiple choices provided