Refer to the preceding problem. Suppose Heinz measured performance on the cash basis instead of the accrual basis. Compute the cash receipts, cash disbursements, and net cash inflows (outflows) during May. Which measure, net income or net cash inflows (out-flows), provides a better measure of overall performance? Why?
In preceding problem, H.J. Heinz Company’s actual condensed balance sheet data for April 27, 2011, follow ($ in millions):

The following summarizes a few transactions during May 2011 ($ in millions):
a. Ketchup carried in inventory at a cost of $4 was sold for cash of $3 and on open account of $8, for a grand total of $11.
b. Acquired inventory on account, $6.
c. Collected receivables, $5.
d. On May 2, used $12 cash to prepay some rent and insurance for 12 months. Heinz classifies prepaid expenses as Other Assets.
e. Payments on accounts payable (for inventories), $4.
f. Paid selling and administrative expenses in cash, $1.
g. Prepaid expenses of $1 for rent and insurance expired in May.
h. Depreciation expense of $2 was recognized forMay.

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