Problem: The Water Fun Store is a retailer of water sports products for backyard swimming pools. During August, the firm had the following operating activities:
Date Event
Aug. 1 Bought $5000 of goods for resale from Pinetree Wholesalers on credit
5 Paid $450 to the local newspaper for advertising that ran during July.
6 Paid $975 rent for the month of August.
9 Sold goods to customers for $7350 on credit. These goods had cost the firm $3600.
10 Paid $3000 to Pinetree Wholesalers in partial payment for goods purchased August 1.
11 Collected $5350 from goods sold on August 9.
13 Bought $9200 of goods for resale from Stanley Company. Paid cash.
16 Paid employees for their work so far in August, $1050.
19 Sold goods to customers on credit for $6350. These goods had cost the firm $2400.
25 Collected $3700 from the sales made on August 19.
29 Paid $975 rent for the month of September.
31 Employees had earned an additional $1200 of wages but would not be paid until September 1.
Q1. Prepare a report of net cash flow from operating activities.
Q2. Prepare an accrual basis income statement.
Q3. Which documents a more realistic or complete picture of August's activity? Why?