Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending Balance Beginning Balance Cash and cash equivalents $ 102,000 $ 122,400 Accounts receivable 81,700 88,000 Inventory 109,700 100,000 Total current assets 293,400 310,400 Property, plant, and equipment 291,000 280,000 Less accumulated depreciation 97,000 70,000 Net property, plant, and equipment 194,000 210,000 Total assets $ 487,400 $ 520,400 Accounts payable $ 64,000 $ 113,700 Income taxes payable 49,700 65,700 Bonds payable 120,000 100,000 Common stock 140,000 120,000 Retained earnings 113,700 121,000 Total liabilities and stockholders’ equity $ 487,400 $ 520,400 During the year, Ravenna paid a $12,000 cash dividend and it sold a piece of equipment for $6,000 that had originally cost $13,800 and had accumulated depreciation of $9,200. The company did not retire any bonds or repurchase any of its own common stock during the year. 9-a. What is the amount and direction (+ or −) of the income taxes payable adjustment to net income in the operating activities section of the statement of cash flows? 9-b. What does this adjustment represent?
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Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of
| Ending Balance | Beginning Balance | ||||
| Cash and cash equivalents | $ | 102,000 | $ | 122,400 | |
| 81,700 | 88,000 | ||||
| Inventory | 109,700 | 100,000 | |||
| Total current assets | 293,400 | 310,400 | |||
| Property, plant, and equipment | 291,000 | 280,000 | |||
| Less |
97,000 | 70,000 | |||
| Net property, plant, and equipment | 194,000 | 210,000 | |||
| Total assets | $ | 487,400 | $ | 520,400 | |
| Accounts payable | $ | 64,000 | $ | 113,700 | |
| Income taxes payable | 49,700 | 65,700 | |||
| Bonds payable | 120,000 | 100,000 | |||
| Common stock | 140,000 | 120,000 | |||
| 113,700 | 121,000 | ||||
| Total liabilities and |
$ | 487,400 | $ | 520,400 | |
During the year, Ravenna paid a $12,000 cash dividend and it sold a piece of equipment for $6,000 that had originally cost $13,800 and had accumulated depreciation of $9,200. The company did not retire any bonds or repurchase any of its own common stock during the year.
9-a. What is the amount and direction (+ or −) of the income taxes payable adjustment to net income in the operating activities section of the statement of cash flows?
9-b. What does this adjustment represent?
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Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows:
| Ending Balance | Beginning Balance | ||||
| Cash and cash equivalents | $ | 102,000 | $ | 122,400 | |
| Accounts receivable | 81,700 | 88,000 | |||
| Inventory | 109,700 | 100,000 | |||
| Total current assets | 293,400 | 310,400 | |||
| Property, plant, and equipment | 291,000 | 280,000 | |||
| Less accumulated depreciation | 97,000 | 70,000 | |||
| Net property, plant, and equipment | 194,000 | 210,000 | |||
| Total assets | $ | 487,400 | $ | 520,400 | |
| Accounts payable | $ | 64,000 | $ | 113,700 | |
| Income taxes payable | 49,700 | 65,700 | |||
| Bonds payable | 120,000 | 100,000 | |||
| Common stock | 140,000 | 120,000 | |||
| Retained earnings | 113,700 | 121,000 | |||
| Total liabilities and stockholders’ equity | $ | 487,400 | $ | 520,400 | |
During the year, Ravenna paid a $12,000 cash dividend and it sold a piece of equipment for $6,000 that had originally cost $13,800 and had accumulated depreciation of $9,200. The company did not retire any bonds or repurchase any of its own common stock during the year.
9-a. What is the amount and direction (+ or −) of the income taxes payable adjustment to net income in the operating activities section of the statement of cash flows?
9-b. What does this adjustment represent?
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