Reference no: EM132527898

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                      Beginning
                                                      Balance                            Balance
Cash                                     $ 80, 800                   $ 96, 800
Accounts receivable                  65,400                          70, 400
Inventory                                87, 800                       80,000
Total current assets                  234,000                    247,200
Property, plant, and equipment     234,000                      224,000
Less accumulated depreciation      78,000                      56,000
Net property, plant, and equipment  156,000                168,000
Total assets                              $ 390, 000             $ 415 , 200
Accounts payable                        $51, 200              $ 91,000
Income taxes payable                   39, 800                   51, 200
Bonds payable                              96,000                80,000
Common stock                            112, 000               96,000
Retained earnings                            91,000             97,000
Total liabilities and stockholders' equity  $ 390,000              $ 415, 200

• During the year, Ravenna paid a $9,600 cash dividend and it sold a piece of equipment for $4,800 that had originally cost $10,800 and had accumulated depreciation of $7,200. The company did not retire any bonds or repurchase any of its own common stock during the year.

Question 1: If the company debited cost of goods sold and credited inventory for $640,000 during the year, what is the total amount of inventory purchases recorded on the debit side of the Inventory T-account and the credit side of the Accounts Payable T-account?

Question 2: What is the total amount of the debits recorded in the Accounts Payable T-account during the year?

Question 3: What does the amount of these debits represent?

Question 4: What is the combined amount and direction (+ or -) of the inventory and accounts payable adjustments to net income in the operating activities section of the statement of cash flows?

Question 5: What does this amount represent?

Question 6: If the company debited income tax expense and credited income taxes payable $1,180 during the year, what is the total amount of the debits recorded in the Income Taxes Payable account?

Question 7: What does the amount of these debits represent?