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 profit for December 2009 if no other transactions occurred?

2. How much is SD’s cash flow 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 profit and cash flow be for the month of January?