During 2011, Kwon Merchandising Company purchased ($ 20,000) of inventory on account. The company sold inventory on
Question:
During 2011, Kwon Merchandising Company purchased \(\$ 20,000\) of inventory on account. The company sold inventory on account that cost \(\$ 15,000\) for \(\$ 22,500\). Cash payments on accounts payable were \(\$ 12,500\). There was \(\$ 20,000\) cash collected from accounts receivable. Kwon also paid \(\$ 4,000\) cash for operating expenses. Assume that Kwon started the accounting period with \(\$ 18,000\) in both cash and common stock.
Required
a. Identify the events described in the preceding paragraph and record them in a horizontal statements model like the following one:
b. What is the balance of accounts receivable at the end of 2011?
c. What is the balance of accounts payable at the end of 2011 ?
d. What are the amounts of gross margin and net income for 2011?
e. Determine the amount of net cash flow from operating activities.
f. Explain any differences between net income and net cash flow from operating activities.
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