Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
5th Edition
ISBN: 9780134078939
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 1, Problem 1.38E
Preparing the statement of
Bean Town Food Equipment Company had the following transactions for the month ending February 29, 2016. Bean Town’s cash balance on February 1, 2016, was $16,400.
Feb. 1 | Common stock was issued to stockholders for $7,500 cash. |
7 | Purchased equipment for $2,500 on account. |
14 | Paid $18,000 cash for land. |
17 | Paid cash expenses: employees’ salaries, $1,500; office rent, $1,800; utilities, $500. |
23 | Paid cash dividends of $3,000. |
26 | Earned service revenue for the month, $8,000, receiving cash. |
Prepare the statement of cash flows of Bean Town Food Equipment Company for the month ended February 29, 2016.
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Cash-Basis and Accrual-Basis Accounting
The records of Summers Building Company reveal the following information for 2011.
a. Cash receipts during 2011 (including $50,000 paid by stockholders in exchange for common stock) were $271,000.
b. Cash payments during 2011 (including $7,600 of dividends paid to stockholders) were $164,850.
c. Total selling price of services billed to customers during 2011 was $201,600.
d. Salaries earned by employees during 2011 were $113,430.
e. Cost of supplies used during 2011 in operation of the business was $47,255.
Required:
1. Calculate Summers Building Company's net income for 2011 on an accrual basis.
$
2. Calculate Summers Building Company's net income for 2011 on a cash-basis.
$
3. Explain how the cash-basis of accounting allows for the manipulation of income.
The input in the box below will not be graded, but may be reviewed and considered by your instructor.
Accountants for Johnson, Inc. have assembled the following data for the year ended December 31, 2018:
2018 2017
Current Assets
Cash $124,700 $26,000
Accounts Receivable 64,500 69,400
Merchandise Inventory 82,000 79,000
Current Liabilities
Accounts Payable 57,700 55,500
Income Tax Payable 14,300 17,100
Transaction Data for 2018:
Issuance of common stock for cash $43,000 Payment of notes payable $44,100
Depreciation expense 26,000 Payment of cash dividends 51,000
Purchase of equipment with cash 69,000 Issuance of notes payable to borrow cash 66,000
Acquisition of land by issuing long-term notes payable 115,000 Gain on sale of building 6,500
Book value of building sold 56,000 Net income 70,500
Prepare Johnson's statement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities.
The following transactions occurred during March 2018 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.
Issued 30,000 shares of capital stock in exchange for $300,000 in cash.
Purchased equipment at a cost of $40,000. $10,000 cash was paid and a note payable was signed for the balance owed.
Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system.
Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000.
Paid $5,000 in rent on the warehouse building for the month of March.
Paid $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2018.
Paid $70,000 on account for the merchandise purchased in 3.
Collected $55,000 from customers on account.
Recorded depreciation expense of $1,000 for the month on the equipment.
Required:1. Analyze each transaction by indicating the cash effect and classify each as a financing, investing, and/or…
Chapter 1 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
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