ACC206 Week 1 Assignment Answers Correct w/ Solutions!! USE it as a GUIDE

profilerubyCpaMba
 (Not rated)
 (Not rated)
Chat

Week One Assignment

 

 Please complete the following 5 exercises below in either Excel or a word document (but must be single document).

 

1.  Critical Thinking Question:

Answer the following questions: 

What is the purpose of the statement of cash flows?  What are the three main categories and give examples for each category?

 

2.  Classification of activities

Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N) activity.

a.       ________ Acquired a new laser printer by paying $950.

b.      ________ Received $70,000 from the issuance of common stock.

c.       ________ Paid $1,500 of interest on a note payable.

d.      ________ Purchased $9,800 of merchandise for cash.

e.       ________ Received $10,200 from cash sales.

f.       ________ Paid a $15,000 dividend.

g.       ________ Acquired a $500,000 building by signing a $500,000 mortgage note.

h.      ________ Received $60,000 from the sale of land.

 

3.  Overview of direct and indirect methods

Evaluate the comments that follow as being True or False. If the comment is false, briefly explain why.

a.       The dollar change in the Merchandise Inventory account appears on the statement of cash flows only when the direct method of statement preparation is used.

b.      Depreciation expense is added back to net income when the indirect method is used.

c.       The cash paid to suppliers is normally disclosed on the statement of cash flows when the indirect method of statement preparation is employed.

d.      One of the advantages of using the direct method rather than the indirect method is that larger cash flows from financing activities will be reported.

e.       Both the direct and indirect methods will produce the same cash flow from operating activities. 

 

4.  Equipment transaction and cash flow reporting

Property, plant, & equipment

Dec. 31, 20X8

Dec. 31, 20X7

Land

$72,000

$72,000

Equipment

630,000

520,000

Less: Accumulated depreciation

-308,000

-325,000

 

New equipment purchased during 20x8 totaled $175,000. The 20x8 income statement disclosed equipment depreciation expense of $34,000 and a $2,000 loss on the sale of equipment.

a.  Determine the cost and accumulated depreciation of the equipment sold during 20X8.

b.  Determine the selling price of the equipment sold.

c.  Show how the sale of equipment would appear on a statement of cash flows prepared by using the indirect method.

 

5.  Cash flow information: Direct and indirect methods 


The comparative year-end balance sheets of USA Graphics, Inc., revealed the following activity in the company's current accounts:

 

20X8

20X7

Increase / Decrease)

Current assets

   

Cash

$55,400

$35,200

$20,200

 

Accounts receivable (net)

83,800

88,000

-4,200

 

Inventory

243,400

233,800

9,600

 

Prepaid expenses

25,400

24,200

1,200

 

    

 

Current liabilities

   

 

Accounts payable

$123,600

$140,600

($17,000)

 

Taxes payable

43,600

49,200

-5,600

 

Interest payable

9,000

6,400

2,600

 

Accrued liabilities

38,800

60,400

-21,600

 

Note payable

44,000

44,000

 

    

 

The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm's selling and administrative expenses. The company's condensed income statement follows. 

 

USA GRAPHICS INC.

Income Statement

for the Year Ended December 31, 20X8

 

 

 

 

 

 

 

 

 

Sales

      

$691,800

 

Less: Cost of goods sold

    

223,000

 

Gross profit

     

$468,800

 

 

       

 

Less: Selling & administrative expenses

 

$177,000

  

 

Depreciation expense

 

   

18,000

  

 

     Interest expense  

 

   

27,000

 

222,000

 

 

       

 

Add: gain on sale of land

    

$246,800

 

 

      

18,800

 

Income before taxes

    

$265,600

 

Income taxes

     

38,300

 

Net income

     

$227,300

 

 

 

 

 

 

 

 

 

 

 

Other data:

1.  Long-term investments were purchased for cash at a cost of $64,200.

2.  Cash proceeds from the sale of land totaled $74,200.

3.  Store equipment of $34,000 was purchased by signing a short-term note payable. Also, a $140,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.

4.  A long-term note of $42,200 was repaid.

5.  Twenty thousand shares of common stock were issued at $5.19 per share.

6.  The company paid cash dividends amounting to $125,000.

 

Instructions:

a. Prepare the operating activities section of the company's statement of cash flows, assuming use of:

  1. The direct method.

  2. The indirect method.

b. Prepare the investing and financing activities sections of the statement of cash flows.

    • 10 years ago
    ACC206 Week 1 Assignment Answers __ A++ Correct w/ Solutions!!
    NOT RATED

    Purchase the answer to view it

    blurred-text
    • attachment
      acc206__week_1__assignment__answers__10__2013.docx