Candy Canes Inc. spends $100,000 to buy sugar and peppermint in April. It produces its candy and sells it to distributors in May for $150,000, but it does not receive payment until June. For each month, find the firm’s sales, net income, and net cash flow.

In April, the company purchased raw materials (Sugar and Peppermint) for $100,000. The entries posted are debit to Inventories and Credit to Cash account (both amounting to $100,000 each).

As such in April,

Sales is zero
Net income is zero
Net cash flow is an outflow of $100,000 (used in the purchase of raw materials)

It produces its candy and sells it to distributors in May for $150,000, but it does not receive payment until June.

When the sale is made in May, the entries required is Debit accounts receivables $150,000 and Credit Sales revenue $150,000. Also, Debit cost of goods sold $100,000 and Credit Inventories $100,000.

Net income is the difference between sales and cost of sales.

As such in May,

Sales is $150,000
Net income is $500,00
Net cash flow is zero

For June,

Payment for goods sold in May were received, entries posted are debit to cash account and a credit to accounts receivables (both balance sheet accounts), hence;

Sales is zero
Net income is zero
Net cash flow is an inflow of $150,000 (amount received from customers)