Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Chapter 1, Problem 8SEB
To determine
Classify each business transactions as an operating, investing or financing activity.
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1.Assume you are a credit manager in charge of
approving commercial loans to business firms. Identify
three aspects of a firm's cash flows you would review
and explain the type of information you hope to gain
from reviewing each of those five aspects.
Consider the following statements. For each one of them state whether the statement is true or false and provide a brief explanation to support your answer.
a) Financial accounting is targeted at external users while management accounting focuses on internal users.
b) The trial balance is part of a company’s financial statements.
c) Bank loans are always non-current liabilities.
d) In accounting, revenues are recognised whenever there is a cash transfer.
e) As understandability is one of the key characteristics of accounting according to the IASB conceptual framework, transactions that are too difficult should not be recognised in the accounts.
1. Identifying assets, liabilities and capital.
Here is a list of assets and liabilities and references to
capital. Read through the list, and then identify which items
are assets, liabilities, capital.
• Vehicle
• Shop fittings
• Cash at bank
• Bank loan
• Owners investment in the business
Inventory
• Trade receivables
• Bank overdraft
• Trade payables
Machinery
• Cash in hand
●
Equipment
• Amounts owing to suppliers
• Furniture
● Land
• Loan from a friend
• Value of owner's stake in the business
• Amounts owed by customers
• Cash at bank
●
• Fittings
Chapter 1 Solutions
Financial Accounting
Ch. 1 - 1. What is the main purpose of a business? 2....Ch. 1 - Prob. 2YTCh. 1 - 1. What are the two sources of financing for a...Ch. 1 - 1. What are revenues and expenses? 2. What are the...Ch. 1 - 1. What are the two parts of shareholders equity?...Ch. 1 - Prob. 6YTCh. 1 - Prob. 7YTCh. 1 - Prob. 1QCh. 1 - Prob. 2QCh. 1 - Prob. 3Q
Ch. 1 - Prob. 4QCh. 1 - What are the advantages of the corporate form of...Ch. 1 - What are the disadvantages of the corporate form...Ch. 1 - Prob. 7QCh. 1 - Prob. 8QCh. 1 - What are the basic financial statements? Describe...Ch. 1 - What makes the income statement different from the...Ch. 1 - Prob. 11QCh. 1 - What type of activities relate to what the firm is...Ch. 1 - Prob. 2MCQCh. 1 - Prob. 3MCQCh. 1 - Prob. 4MCQCh. 1 - Prob. 5MCQCh. 1 - Online Pharmacy Company borrowed 5,000 cash from...Ch. 1 - Prob. 7MCQCh. 1 - During its first year of business, West Company...Ch. 1 - Interest is the cost of a. purchasing inventory....Ch. 1 - Prob. 10MCQCh. 1 - Classify business transactions. (LO 2). For each...Ch. 1 - Identify balance sheet items. (LO 4). Classify the...Ch. 1 - Calculate owners equity. (LO 4). Doughnut Company...Ch. 1 - Prob. 4SEACh. 1 - Prob. 5SEACh. 1 - Calculate owners equity. (LO 4). Pasta Enterprises...Ch. 1 - Super Shop had a retained earnings balance of...Ch. 1 - Prob. 8SEBCh. 1 - Prob. 9SEBCh. 1 - Breck Company shows 80,000 worth of assets on its...Ch. 1 - Prob. 11SEBCh. 1 - For each of the following, calculate the missing...Ch. 1 - Prob. 13SEBCh. 1 - M Company had a retained earnings balance of 4,200...Ch. 1 - Prob. 15EACh. 1 - Analyze business transactions using the accounting...Ch. 1 - Prob. 17EACh. 1 - Prob. 18EACh. 1 - Enter each transaction below into the accounting...Ch. 1 - Prob. 20EACh. 1 - For each of the transactions given, tell whether...Ch. 1 - Prob. 22EACh. 1 - Enter each transaction into the accounting...Ch. 1 - Prob. 24EACh. 1 - Relationship between income statement and balance...Ch. 1 - Bob started a pool cleaning business on the first...Ch. 1 - Prob. 27EACh. 1 - Retained earnings and cash. (LO 4). Checkmate...Ch. 1 - Prob. 29EACh. 1 - Prob. 30EBCh. 1 - Prob. 31EBCh. 1 - Prob. 32EBCh. 1 - Prob. 33EBCh. 1 - Prob. 34EBCh. 1 - Classify business transactions. (LO 2). For each...Ch. 1 - Prob. 36EBCh. 1 - Prob. 37EBCh. 1 - Enter each transaction into the accounting...Ch. 1 - Prob. 39EBCh. 1 - Prob. 40EBCh. 1 - Frank Frock started a consulting business on the...Ch. 1 - Prob. 42EBCh. 1 - Prob. 43EBCh. 1 - Prob. 44EBCh. 1 - Prob. 45PACh. 1 - Prob. 46PACh. 1 - Prob. 47PACh. 1 - Analyze business transactions and the effect on...Ch. 1 - Prob. 49PACh. 1 - Analyze business transactions and prepare the...Ch. 1 - Prob. 51PACh. 1 - Prob. 52PBCh. 1 - Analyze business transactions using the accounting...Ch. 1 - Prob. 54PBCh. 1 - Prob. 55PBCh. 1 - Prob. 56PBCh. 1 - Prob. 57PBCh. 1 - Prob. 58PBCh. 1 - Prob. 1FSACh. 1 - Prob. 2FSACh. 1 - Prob. 3FSACh. 1 - What is the Walt Disney Companys key objective? Go...
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- Please explain as wellarrow_forwardClassify each of the following transactions as increasing, decreasing, or having no effect on cash flows: a. Purchasing inventory from a supplier on account b. Purchasing office supplies and writing a cheque to cover the amount c. Selling inventory to a customer on account d. Buying a building by making a down payment and taking out a mortgage for the balance of the amount owed e. Depreciating capital assets f. g. Issuing common shares Making a payment on a bank loan, where the amount paid includes interest and a portion of the principal h. Declaring and paying dividends to shareholders i. j. Paying wages owed to employees Receiving interest owed from a customer 11arrow_forwardApplying Financial Statement Linkages to Understand TransactionsConsider the effects of the independent transactions, a through g, on a company's balance sheet, income statement, and statement of cash flows. Complete the table below to explain the effects and financial statement linkages. Refer to Exhibit 2.10 as a guide for the linkages.a. Owners invested cash in the company in exchange for shares of common stock.b. The company received cash from the bank for a loan.c. The company purchased equipment to manufacture goods for sale and paid with cash.d. The company manufactured a custom piece of inventory and paid cash for materials and labor. The company sold the inventory for more than cost, and the customer promised to pay for the inventory in 30 days.e. The company paid monthly rent for a manufacturing space.f. The company paid cash dividends to the owners.g. The company received cash from the customer in transaction d.To indicate the account increases (+), enter "1" in the answer…arrow_forward
- Among the transactions of Beeler, Inc., were the following:a. Made payments on accounts payable to merchandise suppliers.b. Paid the principal amount of a note payable to First Bank.c. Paid interest charges relating to a note payable to First Bank.d. Issued bonds payable for cash; management plans to use this cash in the near future to expandmanufacturing and warehouse capabilities.e. Paid salaries to employees in the finance department.f. Collected an account receivable from a customer.g. Transferred cash from the general bank account into a money market fund. h. Used the cash received in d, above, to purchase land and a building suitable for a manufactur-ing facility. i. Made a year-end adjusting entry to recognize depreciation expense.j. At year-end, purchased for cash an insurance policy covering the next 12 months.k. Paid the quarterly dividend on preferred stock.l. Paid the semiannual interest on bonds payable.m. Received a quarterly dividend from an investment in the preferred…arrow_forwardThe speculative motive is the need to hold cash O a. To pay outstanding checks b. To maintain a firm's daily operations c. To invest in opportunities which may arise Od. To compensate a bank for services renderedarrow_forward. Complete the following table regarding cash flows. Transaction number Transaction CFO, CFI, CFF ? Cash inflow or cash outflow ? 1. Sold stock to the public 2. Borrow money from a local bank 3. Purchased equipment for cash 4. Provided a service for cash 5. Paid salaries to employeesarrow_forward
- Business makes payment of Bank loan. Which of the following is the correct journal entry? a. Dr Bank Loan account Cr Cash account b. Dr Cash account Cr Loan c. Dr Cash account. Cr Capital d. Dr Bank Cr Cash accountarrow_forwardWhich of the following is the amount of revenue reported on the income statement of a retail company? Cash sales for the period and collections from customers. Both cash and credit sales for the period. Cash sales and stockholders' investments. The cash collected from customers during the current period.arrow_forwardBusinesses engage in multiple activities that can be categorized as Financing, Investing, and Operating activities. All of the following are considered Financing activities except: Select one: a. Borrowing money from a bank b. Purchasing manufacturing equipment c. Repayment of Bonds Payable d. Issuing Common Stock e. Payment of cash dividendarrow_forward
- Calculate the profit of a bank by preparing income and expenditure statement. -Assume that you are an accountant in a PNZ Bank. From the following particulars, prepare the profit and loss account of bank PNZ for the year ended 31-03-2020. Particulars OMR Particulars OMR Locker rent Discount on bills discounted Director and auditor fee Establishment Expenses Interest on loan Interest on fixed deposit Interest on cash credit Sundry expenses Impairment for credit loss Transfer fee Fee and commission expenses Provision for doubtful debts Decrease in net changes in face value of sale of investment 70,000 2,100,000 50,000 600,000 2,800,000 2,980,000 2,400,000 20,000 2,000 5,000 25,000 300,000 900 Interest on current account Interest on over draft Interest on savings bank account Postage and telegram Printing and stationary Discount on bills discounted Rent and taxes Income tax expenses Depreciation Fee and commission income Profit on exchange difference arising on foreign…arrow_forwardQuestion: What is the source documents for Payment made by the business X. option: a) invoice received by the business X. b) invoice issued by the business X. c) Receipts received by the business X. d) Receipts issued by the business X. e) Bank Debit advice. f) Bank credit advice. g) internal memo. h) cash sales slip. i) Cheque butt. J) credit note issued by business X. reqiured: Please answer this question by choosing the right option.arrow_forwardIndicate if the following transactions increase or decrease cash and classify the transactions as Operating, Investing or Financing Activities Enter I For increase and D for decrease. Enter O for Operating, I for Investing, and F for Financing. 1. Pay taxes D O 2. Collect cash from customers I O 3. Issue common stock F 4. Take out a loan from a bank 5. Purchase stock in another company I 6. Sell government debt security 7. Buy a patent 8. Retire a bonds payable 9. Pay dividends 10. Pay insurance 11. Pay interest on a loan 12. Pay principal on a loan 13. Pay salaries 14. Repurchase treasury stock 15. Sell a copyright to another firm 16. Pay suppliers for inventory 17. Dividend payments received from stock investment. 18. Interest payments received from investment in government debt securities.arrow_forward
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