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Answer the following questions for the directors: A. True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance?

Answer the following questions for the directors: A. True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Requirements 1. Answer the following questions for the directors: A. True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? B. True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? c. True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans? D. True or false, the financing activities section of the statement of cash flows reflects the cash flows that affect current assets and liabilities? E. True or false, buying property, plant and equipment would be considered a cash outflow from financing? F. True or false, the financing section of the statement of cash flows reflects transactions in the equity accounts and the long-term liability accounts? G. True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an investor who was willing to sell them land worth $500,000 in exchange for stock in the company, would this transaction be shown in the investing activities section of the statement of cash flows? 2. Reconstruct the company's comparative balance sheet for 2020/2021 using the information in line with your first name initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure. 3. Prepare a complete statement of cash flows for 2021 using the indirect method using the information in line with your first name initial.
Transcribed Image Text:Requirements 1. Answer the following questions for the directors: A. True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? B. True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? c. True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans? D. True or false, the financing activities section of the statement of cash flows reflects the cash flows that affect current assets and liabilities? E. True or false, buying property, plant and equipment would be considered a cash outflow from financing? F. True or false, the financing section of the statement of cash flows reflects transactions in the equity accounts and the long-term liability accounts? G. True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an investor who was willing to sell them land worth $500,000 in exchange for stock in the company, would this transaction be shown in the investing activities section of the statement of cash flows? 2. Reconstruct the company's comparative balance sheet for 2020/2021 using the information in line with your first name initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure. 3. Prepare a complete statement of cash flows for 2021 using the indirect method using the information in line with your first name initial.
Auga Company Ltd Comparative Balance Sheet December 31, 2021 and 2020 2021 2020 Increase/(Decrease) Assets Cash 175,000 15,000 ? Accounts Receivable 230,000 220,000 ? Inventories 310,000 340,000 10,000 ? Prepaid expenses Intangible assets Equipment, net Total Assets 30,000 105,000 105,000 ? 860,000 1,710,000 830,000 1,520,000 Liabilities Accounts payable Accrued liabilities 90,000 140,000 ? 190,000 160,000 ? Income tax payable Long-term notes payable Stockholders' Equity 120,000 360,000 140,000 450,000 Common Stock Retained earnings Treasury stock Total liabilities and stockholders' equity 1,710,000 1,520,000 400,000 640,000 (90,000) 250,000 400,000 (20,000) Auga Company Ltd Income Statement Year Ended December 31,2021 Revenues and gains: 1,900,000 20,000 Sales revenue Gain on sale of plant assets Total revenues and gains Expenses Cost of goods sold Depreciation expense Other operating expense Total expenses Income before income taxes Income tax expense Net Income 1,920,000 850,000 190,000 360,000 1,400,000 520,000 180,000 340,000 Notes 320,000 Acquisition of plant asset during 2021 Sale proceeds from sale of plant asset Receipt for issuance of notes payable Payment for note payable Dividend paid 120,000 10,000 100,000 100,000 Book value of equipment sold 100,000
Transcribed Image Text:Auga Company Ltd Comparative Balance Sheet December 31, 2021 and 2020 2021 2020 Increase/(Decrease) Assets Cash 175,000 15,000 ? Accounts Receivable 230,000 220,000 ? Inventories 310,000 340,000 10,000 ? Prepaid expenses Intangible assets Equipment, net Total Assets 30,000 105,000 105,000 ? 860,000 1,710,000 830,000 1,520,000 Liabilities Accounts payable Accrued liabilities 90,000 140,000 ? 190,000 160,000 ? Income tax payable Long-term notes payable Stockholders' Equity 120,000 360,000 140,000 450,000 Common Stock Retained earnings Treasury stock Total liabilities and stockholders' equity 1,710,000 1,520,000 400,000 640,000 (90,000) 250,000 400,000 (20,000) Auga Company Ltd Income Statement Year Ended December 31,2021 Revenues and gains: 1,900,000 20,000 Sales revenue Gain on sale of plant assets Total revenues and gains Expenses Cost of goods sold Depreciation expense Other operating expense Total expenses Income before income taxes Income tax expense Net Income 1,920,000 850,000 190,000 360,000 1,400,000 520,000 180,000 340,000 Notes 320,000 Acquisition of plant asset during 2021 Sale proceeds from sale of plant asset Receipt for issuance of notes payable Payment for note payable Dividend paid 120,000 10,000 100,000 100,000 Book value of equipment sold 100,000
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