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23 February, 11:30

flagler company purchased $4,000 of merchandise on account. flagler sold the merchandise to a customer for $7,000 cash. what is the increase in gross margin and the net change in cash flow from operating activities as a result of these transactions

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  1. 23 February, 14:45
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    The answer is:

    Gross profit = $3,000

    Net change in cash flow is the inflow of $7,000 to be collected from customers.

    Explanation:

    Gross profit equals Revenue minus Cost of Sales.

    Revenue is $7,000

    Cost of sales is $4,000

    Therefore, gross profit =

    $7,000 - $4,000

    =$3,000.

    Net change in cash flow from operating activities will be the inflow of $7,000 that will be collected from customers.

    Cash collected from customers is a line item in cash flow under operating activities section.
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