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Question

The accounting records of Ashby Fur Traders include these accounts:

CashAccounts ReceivableInventoryAug 1 80,000Aug 1 8,000Aug 1 6,000Receipts 418,000Payments 450,000Receipts 522,000 Collections 418,000Purchases 433,000Cost of Sales 333,000Aug 31 48,000Aug 31 112,000Aug 31 106,000EquipmentAccumulated Deprec.—EquipmentAccounts PayableAug 1 181,000Aug 1 45,000Aug 15,000Acquisition 4,000Depreciation 5,000Payments 334,000Purchases 433,000Aug 31 185,000Aug 31 50,000Aug 31 114,000Accrued Liabilities Retained EarningsAug 1 14,000QuarterlyAug 1 63,000Payments 35,000Receipts 30,000Dividend 20,000Net Income 25,000Aug 31 9,000Aug 31 68,000\begin{matrix} \text{Cash} & \quad & \text{Accounts Receivable} & \quad & \text{Inventory}\\ \text{Aug 1 80,000} & \quad & \text{Aug 1 8,000} & \quad & \text{Aug 1 6,000}\\ \text{Receipts 418,000} & \text{Payments 450,000} & \text{Receipts 522,000 } & \text{Collections 418,000} & \text{Purchases 433,000} & \text{Cost of Sales 333,000}\\ \text{Aug 31 48,000} & \quad & \text{Aug 31 112,000} & \quad & \text{Aug 31 106,000}\\ \text{Equipment} & \quad & \text{Accumulated Deprec.—Equipment} & \text{Accounts Payable}\\ \text{Aug 1 181,000} & \quad & \quad & \text{Aug 1 45,000} & \quad & \text{Aug 15,000}\\ \text{Acquisition 4,000} & \quad & \quad & \text{Depreciation 5,000} & \text{Payments 334,000} & \text{Purchases 433,000}\\ \text{Aug 31 185,000} & \quad & \quad & \text{Aug 31 50,000} & \quad & \text{Aug 31 114,000}\\ \text{Accrued Liabilities } & \quad & \text{Retained Earnings}\\ \quad & \text{Aug 1 14,000} & \text{Quarterly} & \text{Aug 1 63,000}\\ \text{Payments 35,000} & \text{Receipts 30,000} & \text{Dividend 20,000} & \text{Net Income 25,000}\\ \quad & \text{Aug 31 9,000} & \quad & \text{Aug 31 68,000}\\ \end{matrix}

Compute Ashby’s net cash provided by (used for) operating activities during August. Use the indirect method. Do you see any potential problems in Ashby’s cash flows from operations? How can you tell?

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In this exercise, we are asked to compute Ashby’s net cash provided by (used for) operating activities using the indirect method, during August. Also, we are asked to tell if there are any potential problems in Ashby’s cash flows from operations.

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