Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 16

Calculating and Understanding Operating Cash Flows Relating to Inventory Purchases (Indirect Method)
The following information was reported by three companies. When completing the requirements, assume that any and all purchases on account are for inventory.

Required:
1. What amount did each company deduct on the income statement related to inventory
2. What total amount did each company pay out in cash during the period related to inventory purchased with cash and on account
3. By what amount do your answers in 1 and 2 differ for each company
4. By what amount did each company's inventory increase (decrease) By what amount did each company's accounts payable increase (decrease)
5. Using the indirect method of presentation, what amount(s) must each company add (deduct) from net income to convert from accrual to cash basis
6. Describe any similarities between your answers to requirements 3 and 5. Are these answers the same Why or why not