Sennett Designs (SD) sells furniture on a retail basis. SD began operations duringDecember 2009 and sold furniture for €250,000 in cash. Th e furniture sold by SD waspurchased on credit for €150,000 and delivered by the supplier during December. Th ecredit terms granted by the supplier required SD to pay the €150,000 in January for thefurniture it received during December. In addition to the purchase and sale of furniture,in December, SD paid €20,000 in cash for rent and salaries.1 . How much is SD’s profi t for December 2009 if no other transactions occurred?2 . How much is SD’s cash fl ow for December 2009?3 . If SD purchases and sells exactly the same amount in January 2010 as it did inDecember and under the same terms (receiving cash for the sales and making purchases on credit that will be due in February), how much will the company’s profi tand cash fl ow be for the month of January?
Sennett Designs (SD) sells furniture on a retail basis. SD began operations during
December 2009 and sold furniture for €250,000 in cash. Th e furniture sold by SD was
purchased on credit for €150,000 and delivered by the supplier during December. Th e
credit terms granted by the supplier required SD to pay the €150,000 in January for the
furniture it received during December. In addition to the purchase and sale of furniture,
in December, SD paid €20,000 in cash for rent and salaries.
1 . How much is SD’s profi t for December 2009 if no other transactions occurred?
2 . How much is SD’s cash fl ow for December 2009?
3 . If SD purchases and sells exactly the same amount in January 2010 as it did in
December and under the same terms (receiving cash for the sales and making purchases on credit that will be due in February), how much will the company’s profi t
and cash fl ow be for the month of January?
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