Chapter 15, Problem 7F15

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows:

During the year Ravenna paid a $6,000 cash dividend and it sold a piece of equipment for $3,000 that had originally cost $6,000 and had accumulated depreciation of $4,000. The company did not retire any bonds or repurchase any of its own common stock during the year.

Required:

7. What is the combined amount and direction (+ or -) of the inventory and accounts payable adjustments to net income in the operating activities section of the statement of cash flows? What does this amount represent?