ACC 110 Chapter Notes - Chapter 5: Cash Flow Statement, Operating Cash Flow, Accounts Payable

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greyrhinoceros682

1 Dec 2011

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Document Summary

It"s cash that pays the bills (not income and revenue) Without it business quickly grinds to a halt. The cycle of investing cash in resources, providing goods or services to customers using those resources and collecting cash from customers. Average length of time between receiving inventory from a supplier and. Average number of days between receiving of goods or services from a. Hence multiple financial statements selling it to a customer. Payable deferral period supplier to payment of the supplier. Average length of time between delivery of goods to customer and receipt of. Average number of days between date inventory is paid for and the date it"s. Delay between the expenditure of cash and the receipt of cash is called cash. Less time supplies give an entity to pay. More time an entity give its customer. Cash log = short because there isn"t any inventory to contend with. Lengthy manufacturing process = money for inventory for longer time.

Related Questions

1. Houston Corporation has an inventory conversion period of 60days (DII), a receivables collection period of 36 days (DSO), and apayable deferral period of 24 days (DPO). a. What is the length ofthe companyâs cash conversion cycle? b. If Houstonâs annual salesare $3,960,000 and all sales are on credit, what is the averagebalance in accounts receivable? c. How many times per year doesHouston turn over its inventory? (week 5) d. What would happen toHoustonâs cash conversion cycle if, on average, inventories couldbe turned over eight times a year? 2. Webber Corporation carries anamount of receivables equal to $80,000, and its annual credit salesequal $2.4 million. What is the receivables collection period(DSO)? 3. Cleary Enterprises owes its suppliers $180,000. Thecompanyâs cost of goods sold averages $2.52 million. What isClearyâs payables deferral period (DPO)? 4. Willowman FurnitureCompany has inventory that equals $48 million. If the inventoryturnover for the company is 8, what is the inventory conversionperiod and cost of goods sold?

whitespider552

For each of the following items, indicate by using theappropriate code letter, how the item should be reported in thestatement of cash flows, using the direct method.
(Points : 10)

Potential Matches:

1 : Declaration and payment of a cash dividend.

2 : Decrease in accounts receivable during a period.

3 : Conversion of bonds payable into common stock.

4 : Purchase of land for cash.

5 : Decrease in merchandise inventory during a period.

6 : Decrease in accounts payable during a period.

7 : Issuance of preferred stock for cash.

8 : Sale of equipment for cash at book value.

Answer

: Added in determining cash receiptsfrom customers

: Added in determining cash paymentsto suppliers