Answer:
a. $118,220
Explanation:
The computation of the cost of good sold is shown below:
As we know that
Cost of goods sold = Beginning Inventory + Net purchases + Freight in - Ending Inventory
where,
Net purchase is
= Purchases - Purchase returns and allowances - Purchase discounts
= $102,800 - $10,280
= $95,520
And, the other items values would remain the same
so, the cost of goods sold is
= $30,840 + $92,520 + $15,420 - $20,560
= $118,220
hence, the cosr of good sold is $118,220
Certain schools of economic thought suggest that a _____________ would reduce pollution in a __________________, when compared to command-and-control regulation.
a. marketable permit; less cost-effective way
b. pollution tax; flexible, more cost-effective way
c. marketable permit; less flexible manner
d. pollution tax; less cost effective, but flexible way
Answer:
B.
Explanation:
Certain schools of economic thought suggest that a pollution tax would reduce pollution in a flexible, more cost-effective way when compared to command-and-control regulation. Therefore Option B is correct.
What is School?School refers to a place where formal education or knowledge is conducted. This essay uses the term to refer to both lower-level and higher-level educational institutions.
A school is a section of the school system made up of pupils belonging to one or more grade levels or other dissimilar groupings, organized as a single commodity with one or more teachers to deliver teaching of a specific sort, and housed in one or more facilities.
As is the situation when elementary and secondary schools are housed in the same building or compound, more than one school may be located there.
According to the organization's mandate, the school's daily operations are overseen by elected officials who may include department heads and school administrators. The b role is one of learning, education, and research.
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The following balances are available for Chrisman Company:
December 31, 2016 December 31, 2015
Cash $8,000 $10,000
Accounts receivable 20,000 15,000
Inventory 15,000 25,000
Prepaid rent 9,000 6,000
Land 75,000 75,000
Plant and equipment 400,000 300,000
Accumulated depreciation (65,000) (30,000)
Totals $462,000 $401,000
Accounts payable $12,000 $10,000
Income taxes payable 3,000 5,000
Short-term notes payable 35,000 25,000
Bonds payable 75,000 100,000
Common stock 200,000 150,000
Retained earnings 137,000 111,000
Totals $462,000 $401,000
Bonds were retired during 2016 at face value, plant and equipment were acquired for cash, and common stock was issued for cash. Depreciation expense for the year was $35,000. Net income was reported at $26,000.
Required:
Prepare a statement of cash flows for 2016 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.
Answer:
Chrisman Company
Statement of Cash Flows for the year ended December 31, 2016
(using the indirect method):
Operating activities:
Adjusted cash from operations $61,000
Changes in working capital:
Accounts receivable -5,000
Inventory 10,000
Prepaid rent -3,000
Accounts payable 2,000
Income taxes payable -2,000
Short-term notes payable 10,000
Net cash from operating activities 73,000
Investing activities:
Equipment -100,000
Financing activities:
Bonds -25,000
Common stock 50,000 25,000
Net cash flows -$2,000
Explanation:
a) Data and Calculations:
December 31 December 31 Changes
2016 2015
Cash $8,000 $10,000 -$2,000
Accounts receivable 20,000 15,000 5,000
Inventory 15,000 25,000 -10,000
Prepaid rent 9,000 6,000 3,000
Land 75,000 75,000 0
Plant and equipment 400,000 300,000 100,000
Accumulated depreciation (65,000) (30,000) 35,000
Totals $462,000 $401,000
Accounts payable $12,000 $10,000 $2,000
Income taxes payable 3,000 5,000 -2,000
Short-term notes payable 35,000 25,000 10,000
Bonds payable 75,000 100,000 -25,000
Common stock 200,000 150,000 50,000
Retained earnings 137,000 111,000 26,000
Totals $462,000 $401,000
b) Net income $26,000
Depreciation 35,000
Adjusted cash from operations = $61,000
c) The statement of cash flows can be prepared using either the direct method or the indirect method. The indirect method affects mainly the operating activities section and starts with the net income and adjusts it with non-cash items before considering the changes in the working capital. The statement is a financial statement that classifies the cash flows during the period into three main categories: operating, investing, and financing activities. There are also non-cash flows involving accounts that do not cause any cash flows.
A management concept based on an understanding of the changing wants and needs of customers, and which leads to flexible product designs and production processes, is called:_______.A. Continuous improvement. B. Customer orientation. C. Just-in-time. D. Theory of constraints. E. Total quality management.
Answer:
customer orientation
Explanation:
customer orientation can be regarded as business approach where the company helps the customer to achieve their aim and goals.
On May 2, you receive your bank statement showing a balance of $1,641.18. Your checkbook shows a balance of $1,427.15. Outstanding checks are $167.31, $245.66, and $302.56. The account earned $62.11. Deposit in transit amount to $555.61, and there is a service charge of $8.00. Calculate the reconciled balance. CHECKBOOK BALANCE STATEMENT BALANCE Add: Interest Earned & Other Credits Add: Deposits in Transit SUBTOTAL SUBTOTAL Deduct: Services Charges & Other Debits Deduct: Outstanding Checks ADJUSTED CHECKBOOK BALANCE ADJUSTED STATEMENT BALANCE
Answer and Explanation:
The computation is shown below:
Particulars Amount ($) Particulars Amount ($)
Checkbook balance 1,427.15 Statement balance 1,641.18
Add: Interest earned and Add: Deposits in transit 555.26
other credits 62.11
Less: Service charges Less: Outstanding checks (715.53)
and other debits (8.00)
Adjusted checkbook balance 1,481.26 Adjusted statement balance 1,481.26
The outstanding checks would be total of
= $167.31 + $245.66 + $302.56
= $715.53
What is the break even quantity for the following situation? FC is $1,200 per week, Variable cost is $2 per unit and Revenue is $6 per unit.A) 100.
B) 200.
C) 600.
D) 1,200.
E) 300.
Answer:
he Break-even quantity is 300 units.
Explanation:
The computation of the break even quantity is shown below
Given that
Fixed costs, FC = $1,200 per week
Variable costs, VC = $2 per unit
Revenue = $6 per unit
Based on the above information
Let us assume the break-even quantity be Z
As we know that
Total Costs = Total Revenue
Fixed costs + Variable costs = Price per unit × Quantity sold
$1,200 + ($2 x Z) = ($6 × Z)
1200 + 2Z = 6Z
4Z = 1200
Z = 300
Hence, the Break-even quantity is 300 units.
Consider the following information about an asset that is being review for impairment: Book value $ 700,000 Estimate future cash flows 650,000 Fair value 590,000 What is the amount of the impairment loss for this asset?
Answer:
The amount of the impairment loss for this asset is $110,000
Explanation:
A assets is impaired when the fair market value of that assets lowers than the book value of the asset.
To calculate the impairment of an assets following formula is used
Impairent = Book value of Asset - fair market value of the asset
Placing values in the formula
Impairent = $700,000 - $590,000
Impairent = $110,000
Troy's financial records for the year reflect the following: Interest income from bank savings account $1,440 Taxable annuity receipts 2,880 City ad valorem property tax on investments 216 Investment interest expense 5,040 Calculate Troy's net investment income and his current investment interest deduction. How is a deduction for any potential excess investment interest treated?Troy's net investment income is $_____and his investment interest deduction is $______investment interest expense not deducted this year is_____.
Answer:
net Investment income for Troy = $4,104.
Investment interest deduction = $4,104.
Brought forward.
Explanation:
So, from the question above we are his the folly information for the financial report of Troy.
=> Interest income from bank savings account = $1,440.
=> The Taxable annuity receipts = 2,880.
=> City ad valorem property tax on investments = 216.
=> Investment interest expense = 5,040.
Therefore, Troy's net investment income can be calculated by the addition of Interest income from bank savings account with The Taxable annuity receipts, that is;
Troy's investment income = Interest income from bank savings account + The Taxable annuity receipts.
Troy's investment income = $1,440 + 2,880 = $4,320.
Therefore, the net Investment income for Troy is calculated as;
The net Investment income for Troy = Troy's investment income - City ad valorem property tax on investments.
=>The net Investment income for Troy = $4,320 - $216 = $4,104
Therefore let's fill in the gaps given in the question:
"Troy's net investment income is $4,104 and his investment interest deduction is $4,104.
Investment interest expense not deducted this year is BROUGHT FORWARD"
A semiannual TIPS was issued in December 2017 with a face value of $1,000 and a coupon rate of 1.2%. What coupon payment it must have paid in December 2018 if the CPI was 247.91 in December 2017 and 251.23 in June 2018?
Answer:
The coupon payment = $6.08
Explanation:
The coupon payment = Face value*Coupon rate / 2*CPI June 2017 / CPI December 2018
The coupon payment = $1,000*1.2% / 2*251.23 / 247.91
The coupon payment = 6.08035174055
The coupon payment = $6.08
One reason for imbalance or disequilibrium in the family during the adolescent years is that parents
A. are too involved in their own careers to notice their children.
B. may be experiencing their own type of "identity crisis."
C. may be pushing their child toward financial independence too early.
D. are too restrictive of their adolescents' finances.
Answer: B. may be experiencing their own type of "identity crisis."
Explanation:
Studies have shown that adolescents tend to suffer from identity crises as they enter and progress through teenagehood as they learn which behavior to assimilate and adopt and which to discard.
This has been shown to often coincide with the midlife crises felt by adults which on its own can be a form of identity crises. When this coincides with the identity crises felt by adolescents, an imbalance or disequilibrium in the family is experienced.
Suppose that real gdp per capita in italy is $33,500. if real gdp per capita is growing at a rate of 1.6% per year, how many years will it take for real gdp per capita to reach $67,000?
Answer:
45 years
Explanation:
The computation of the number of years to reach the $67,000 real GDP per capita is shown below:
Here we use the rule of 72 that doubles the real gdp per capita
= 72 ÷ growth rate
= 72 ÷ 1.6%
= 45 years
In 45 years the real GDP per capita would be doubled that means from $33,500 to $67,000 it would be reached in 45 years
We simply applied the above formula so that the correct value could come
And, the same is to be considered
Jumber Corp makes one product. Budgeted unit sales are shown belowJan 7300Feb 8600March 10100April 13600The ending finished goods inventory should equal 30% of the following month's sales. The budgeted required production for February is closest to:A) 8600 unitsB) 11630 unitsC) 9050 unitsD) 14210 units
Answer: 9050 units
Explanation:
From the information given in the question, the following can be deduced:
Budgeted sales for February = 8,600
Add: Desired ending inventory = 3% × 10100 = 0.3 × 10100 = 3,030
Total needs = 8600 + 3030 = 11630
Less: Beginning inventory = (2,580)
Required production = 9050
The budgeted required production for February is 9050 units
Manufacturing cost data for Orlando Company, which uses a job order cost system, are presented below.
Direct materials used $ (a) $ 83,000 $ 63,150
Direct labor 50,000 140,000 (h)
Manufacturing overhead applied 42,500 (d) (i)
Total manufacturing costs 145,650 (e) 213,000
Work in process 1/1/14 (b) 15,500 18,000
Total cost of work in process 201,500 (f) (j)
Work in process 12/31/14 (c) 11,800 (k)
Cost of goods manufactured 192,300 (g) 222,000
Case A Case B Case C
Answer:
Instructions. Indicate the missing amount for each letter. Assume that in all cases manufacturing overhead is applied on the basis of direct labor cost and the rate is the same.
The Calculation of missing figure.
Particulars Case A Case B Case C
Direct materials used $53,150 $83,000 $63,150
Direct labor $50,000 $140,000 $81000
Manufacturing overhead applied $42,500 $119000 $68850
Total manufacturing costs $145,650 $342,000 $213,000
Work in process 1/1/14 $55,850 $15,500 $18,000
Total cost of work in process $201,500 $357,500 $231,000
Work in process 12/31/14 $9,200 $11,800 $11000
Cost of goods manufactured $192,300 $345,700 $222,000
Both excess supply and excess demand are a result of
equilibrium
disequilibrium
overproduction.
elasticity
Answer:
disequilibrium
Explanation:
Disequilibrium is the state of the market when the external and internal forces are stopping from achieving the market balance, so the market is excessively falling out this balance. It can be short-term, or long-term
Disequilibrium happens when the supply is not equal to the demand, when the market is inequal, it can lead to excess supply and excess demand.
Excess demand and excess supply only affect the market as a result of disequilibrium.
What is Disequilibrium?This is a scenario where the quantity supplied does not match the quantity demanded at a given price. Leads to a lost of balance in economy as well as price problems.When the demand is not enough to meet the supply, this disequilibrium is called excess supply. The reverse is excess demand.
In conclusion, option B is correct.
Find out more on disequilibrium at https://brainly.com/question/657854.
The wages payable related to the factory workers for Larkin Company during the month of January are $76,000. The employer's payroll taxes for the factory payroll are $8,000. The fringe benefits to be paid by the employer on this payroll are $6,000. Of the total accumulated cost of factory labor, 85% is related to direct labor and 15% is attributable to indirect labor.
Prepare entries for factory labor.
Instructions
a. Prepare the entry to record the factory labor costs for the month of January.
b. Prepare the entry to assign factory labor to production.
(Weygandt, 12/2017, p. 20-31) Weygandt, J. J., Kimmel, P. D., Kieso, D. E. (2017). Accounting Principles, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119411017 Always check citation for accuracy before use.
Answer:
a. Date Account Titles and Explanation Debit Credit
Factory labor $90,000
Factory wages payable $76,000
Employer payroll taxes payable $8,000
Employer fringe benefits payable $6,000
b. The entry to assign factory labor to production is the following
Date Account Titles and Explanation Debit Credit
Work in process inventory $76,500
(85% of $90,000)
Manufacturing overhead $13,500
(15% of $90,000)
Factory labor $90,000
Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1 of the current year, Trueman Corporation issued $600,000 of 20-year, 11% bonds for $554,861, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31.
(a) Confirm the bond issue price. Round answers to the nearest whole number.
Present value of principal repayment Answer
Present value of interest payments Answer
Selling price of bonds $ 554,861
(b) Indicate the financial statement effects using the template for (1) bond issuance, (2) semiannual interest payment and discount amortization on June 30, and (3) semiannual interest payment and discount amortization on December 31 of the current year. Round answers to the nearest whole number. Use negative signs with answers, when appropriate.
Balance Sheet
Transaction Cash Asset + Noncash Assets = Liabilities + Contributed Capital + Earned Capital
(1) Answer Answer
1.00 points out of 1.00
Answer Answer Answer
(2) Answer Answer Answer Answer Answer
(3) Answer
0.00 points out of 1.00
Answer Answer Answer Answer
0.00 points out of 1.00
Income Statement
Revenue
-
Expenses
=
Net Income
Answer Answer Answer
Answer Answer Answer
0.00 points out of 1.00
Answer Answer Answer
Answer:
a) the issue price of the bonds was $554,861:
PV of face value = $600,000 / (1 + 6%)⁴⁰ = $58,333
PV of coupon payments = $33,000 x 15.046 (PV annuity factor, 6%, 40 periods) = $496,518
market price = $554,851 which is close enough to verify the issue price (the $10 difference is probably due to a rounding error).
b) the journal entries are:
January 1, year 1
Dr Cash 554,861
Dr Discount on bonds payable 45,139
Cr Bonds payable 600,000
June 30, year 1
Dr Interest expense 33,292
Cr Cash 33,000
Cr Discount on bonds payable 292
amortization of discount of bonds payable = ($554,861 x 6%) - $33,000 = $291.66 ≈ $292
December 31, year 1
Dr Interest expense 33,309
Cr Cash 33,000
Cr Discount on bonds payable 309
amortization of discount of bonds payable = ($555,153 x 6%) - $33,000 = $309.18 ≈ $309
Assets = Liabilities + Equity
Cash Bonds payable Discount on BP
554,861 600,000 (45,139)
(33,000) 292 (33,292)
(33,000) 309 (33,309)
Revenues - Expenses = Net income
0 0 0
0 33,292 (33,292)
0 33,309 (33,309)
When an employee reaches a $200,000 income level, they are required to pay a supplementary percentage to their _______________________ tax deduction?A. Social SecurityB. MedicareC. FederalD. Local
Answer:
B. Medicare
Explanation:
given data
employee reaches income level = $200,000
so they are require to pay a supplementary percentage to their Medicare tax because at an income level above than the each and every employee are required to pay their additional percentage of income as FICA Medicare tax.
and current rate for Medicare is approx 1.45% for the employee and employer.
Sarah's dog had purebred puppies that she decided to sell on www.puppyfind.com. She ships them using an airline. If a puppy dies and the buyer decides to sue, who can he sue?
Sarah
the sole proprietorship
the airline carrier
all of the above
Answer:
The buyer should sue the airline carrier
Explanation:
Because it is the airlines job to make sure that the puppy are safe and health
Selling and administrative expenses include all of the following except:____________. a. shipping document preparation. b. post-sale technical support. c. factory overhead. d. customer return processing.
Answer:
c. factory overhead.
Explanation:
Selling and administrative expenses can be defined as the operating expenses which comprises of all the costs incurred in the smooth running of a business.
Selling and administrative expenses include all of the following shipping document preparation, post-sale technical support, and customer return processing except factory overhead.
A factory overhead can be defined as the amount of money incurred by a company or business entity in the course of its manufacturing process.
This ultimately implies that, factory overhead refers to cost incurred in the manufacturing process of finished goods and cannot be linked directly to the goods.
The factory overhead costs include costs such as indirect labor, rent, depreciation, utility bills, property taxes etc.
Student volunteers take visitors on a tour of 7 campus buildings. How many different tours are possible?
Answer:
7! = 5040
Explanation:
Given that Number of campus buildings = 7
To obtain the number of different possible tours, obtain the factorial of 7
7! = 7 * 6 * 5 * 4 * 3 * 2 * 1
7! = 5040
In the previous problem, suppose the project requires an initial investment in net working capital of $150,000, and the fixed asset will have a market value of $185,000 at the end of the project. What is the project’s Year 0 net cash flow?
Answer: See explanation
Explanation:
You didn't tell us the previous problem you are talking about but let me help out.
The project’s Year 0 net cash flow will be calculated as:
= - Initial cost in fixed assets - Net working capital
Since we already know that our net working capital is $150,000, let's assume that the initial cost in fixed assets given in your previous problem is $2,000,000.
Therefore, the project’s Year 0 net cash flow will be:
= -2,000,000 - 150,000
= -2,150,000
Tatum can borrow at 7.15 percent. The company currently has no debt and the cost of equity is 11.55 percent. The current value of the firm is $670,000. The corporate tax rate is 25 percent. What will the value be if the company borrows $385,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Value of the firm __________
Answer:
$766,250
Explanation:
The value of the firm is calculated as follows:
Value of firm = Current value + (Borrowing *Tax rate)
Value of firm = $670,000 + ($385,000*25%)
Value of firm = $670,000 + $96,250
Value of firm = $766,250
The value of the firm will be $766,250 if it borrows $385,000 and uses the proceeds to repurchase shares.
Your local T-Spirit store is having a sale on the latest i-razpod cell phone. The store is also offering financing to those who
qualify. The new cell phone is on sale for $150.00 with a two year contract. The sales associate informs you that the
closed-end installment loan offered by the store is a 24 month installment plan with monthly payments of $8.44.
Determine the finance charge (interest) of the installment loan.
a $52.00
C. $54.30
b. $52.56
d. $56.10
Answer:
$52.56 on edge 2020
Explanation:
Answer:
b
Explanation:
yep
Organization ________ refers to the formal arrangement of roles, responsibilities, and relationships within an organization.
Answer:
A) structure
Explanation:
The organization structure is the structure where the arrangement of the rule, roles, responsibilities, relationships in a formal way could be done in an organziations.
It tells the way to accomplish the goals and the objectives of the company
Therefore according to the given situation, the option A is correct
hence, the same is to be considered
Consider the estimated equation from your textbook: Test Score = 698.9 - 2.28 times STR, R^2 = 0.051, SER = 18.6 (10.4) (0.52) The t-statistic for the slope is approximately: a) 67.20. b) 4.38. c) 1.76. d) 0.52.
Answer:
b) 4.38
Explanation:.
Calculation for the t-statistic for the slope
Using this formula
Slope = Regression equation / Standard Error
Let plug in the formula
Slope= 2.28 / .52
Slope = 4.38
Therefore the t-statistic for the slope is approximately 4.38
Please help! Tina Technology is looking to raise $85,000 worth of capital, and she is looking to raise that money through the internet and still fall under an SEC exemption. How should Tina go about raising that money? Due to the amount of capital she is looking to raise, will Tina be subject to any other special requirements?
Answer:
Throughout this circumstance, the financing approach may be used by Tina Technology through fundraising as well as demand protection from either the SEC.
Explanation:
The following were all those requirements:
The Crowdfunding framework encourages eligible organizations to deliver as well as sell entrepreneurship security.
The principles mandate all transactions together underneath the Crowdfunding Legislation to take place online by an SEC-registered representative, whether through a distributor provider or via a fundraising access.Control the amount that individual financial professionals will impose on certain cryptocurrency donations over a term of one year. For even the most portion, insurance purchased through a crowdfunding marketplace will not be traded once per season. General guide Crowdfunding donations rely on exclusion structures for "troublemakers".A partially amortizing mortgage is made for $180,000 for a term of 30 years. The borrower and lender agree that a balance of $40,000 will remain and be repaid as a lump sum at that time. If the interest rate is 6.50%, what must the monthly payment be over the 30 year period?
a. $1,101.56
b. $1,137.72
c. $5,285.36
d. $11,700.00
Answer:
Monthly payment= $1,137.8
Explanation:
Giving the following information:
PV= 180,000
n= 30*12= 360
i= 0.065/12= 0.005417
To calculate the monthly payment, we need to use the following formula:
Monthly payment= (PV*i) / [1 - (1+i)^(-n)]
Monthly payment= (180,000*0.005417) / [1 - (1.005417^-360)]
Monthly payment= $1,137.8
Tri-coat Paints has a current market value of $41 per share with earnings of $3.64. What is the present value of its growth opportunities (PVGO) if the required return is 9%?
Answer:
the present value of its growth opportunities (PVGO) is $0.56
Explanation:
The computation of the present value of growth opportunities is shown below:
= Price per share - (Earnings ÷ required rate of return)
= $41 - ($3.64 ÷ 9%)
= $41 - $40.44
= $0.56
hence, the present value of its growth opportunities (PVGO) is $0.56
We simply applied the above formula so that the correct value could come
And, the same is to be considered
theory of production
Answer:
Theory of production, in economics, an effort to explain the principles by which a business firm decides how much of each commodity that it sells (its “outputs” or “products”) it will produce, and how much of each kind of labour, raw material, fixed capital good, etc., that it employs (its “inputs” or “factors of .
Explanation:
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Arthur, the ruler of Avalon, has asked for your help with the economy of his country. Arthur's economic minister provides you with the following information:Work-eligible population: 30 million Labor force: 24 million Employed people: 21 million Frictionally unemployed people: 2 million Structurally unemployed people: 1.5 million Arthur would like to know whether his kingdom is enjoying an expansion or suffering a recession. See if you can advise him. Give all numeric answers to two decimals.King Arthur, right now Avalon's unemployment rate is _____%, but Avalon's natural rate of unemployment is ___%. Therefore, the Avalon economy is currently in a(an) (enter expansion or recession).
Answer:
King Arthur, right now Avalon's unemployment rate is 12.5% but Avalon's natural rate of unemployment is 14.58%. Therefore, the Avalon economy is currently in a expansion.
Explanation:
Number of Unemployed = Labor force - Employed
Number of Unemployed = 24 - 21
Number of Unemployed = 3
The unemployment rate = (3/24)*100
The unemployment rate = 12.5%
The Natural unemployment rate = Frictional Rate + Structural unemployment Rate
The Natural unemployment rate = [(2+1.5)/24]*100
The Natural unemployment rate = (3.5/24) * 100
The Natural unemployment rate = 14.58%
From the solution, the current unemployment rate less than natural rate, thus the Avalon economy is currently in a expansion
what is the effect of a "payment on account" by the business and by the
customer
Answer:
The Effect of a "Payment on Account"
By the Business:
The payment reduces the balance of the Accounts Payable. A current liability is reduced while cash is also reduced by an equal amount.
By the Customer:
The payment reduces the balance of the Accounts Receivable. One current asset is reduced and a current asset (cash) is increased by an equal amount.
Explanation:
"Payment on account" represents settlement of liabilities by the business or the customer. When the business settles its liability, there is an outflow of cash. When a customer settles its liability to the business, there is an inflow of cash to the business.