Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter 11, Problem 52PSA
To determine

(a)

In budgetary bookkeeping, a cash flow statement, otherwise called statement of cash flows, is a fiscal report that demonstrates how changes in monetary record records and pay influence cash and cash reciprocals, and separates the examination to operating, investing, and financing activities.

To discuss:

Indicate whether each activity should be classified as a cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, or noncash investing and financing activity. Assume that CTT uses the indirect method.

Expert Solution
Check Mark

Answer to Problem 52PSA

All item explanation below:

Particular Activity Reasons
a. Purchased property, plant, and equipment Investing activity Purchase and sale of fixed assets which is long term purpose, is identified in the investing activity.
b. Purchased merchandise inventory for cash Operating activity Purchase of raw material and sold the finished goods is the normal activity and is to be considered in the operating activity.
c. Recorded depreciation on property, plant, for cash and equipment Non-cash activity As per the indirect method, depreciation is the non-cash item and added back in the operating activity.
d. Issued common stock for cash Financial activity Taking borrowing from another institution or persons which is related outside the firm.
e. Purchased merchandise inventory on credit Non-cash activity Inventory purchase on the credit basic no cash yet outflow.
f. Collected cash sales from customers Operating activity Sale of finished goods is the normal business activity, hence related to operating activity.
g. Paid cash dividends Financial activity Paid cash to the shareholder and shareholder belong to the share and share related to the financial activity.
h. Purchased a 2-year insurance policy for cash mortgage Operating activity Cash paid for advance for the insurance. Adding in the operating activity and balance amount shown in the head of current assets.
i. Paid salaries of employees Operating activity Salary paid to the employees is the normal activity and hence this activity considered in the operating activity.
j. Borrowed cash by issuing a note payable Financial activity Loan taken or repayment of loan all item which is long-term must be considered in the financial activity.
k. Sold property, plant, and equipment for cash Investing activity Purchase and sale of long-term term assets all must be considered in the investing activity.
1. Paid cash for principal amount of mortgage Financial activity Loan taken or repayment of loan all item which is long-term must be considered in the financial activity.
m. Paid interest on mortgage Financial activity Interest paid on the loan is also considered in the financial activity.

Explanation of Solution

All item explanation below:

Particular Reasons
a. Purchased property, plant, and equipment Purchase and sale of fixed assets which is long term purpose, is identified in the investing activity.
b. Purchased merchandise inventory for cash Purchase of raw material and sold the finished goods is the normal activity and is to be considered in the operating activity.
c. Recorded depreciation on property, plant, for cash and equipment As per the indirect method, depreciation is the non-cash item and added back in the operating activity.
d. Issued common stock for cash Taking borrowing from another institution or persons which is related outside the firm.
e. Purchased merchandise inventory on credit Inventory purchase on the credit basic no cash yet outflow.
f. Collected cash sales from customers Sale of finished goods is the normal business activity, hence related to operating activity.
g. Paid cash dividends Paid cash to the shareholder and shareholder belong to the share and share related to the financial activity.
h. Purchased a 2-year insurance policy for cash mortgage Cash paid for advance for the insurance. Adding in the operating activity and balance amount shown in the head of current assets.
i. Paid salaries of employees Salary paid to the employees is the normal activity and hence this activity considered in the operating activity.
j. Borrowed cash by issuing a note payable Loan taken or repayment of loan all item which is long-term must be considered in the financial activity.
k. Sold property, plant, and equipment for cash Purchase and sale of long-term term assets all must be considered in the investing activity.
1. Paid cash for principal amount of mortgage Loan taken or repayment of loan all item which is long-term must be considered in the financial activity.
m. Paid interest on mortgage Interest paid on the loan is also considered in the financial activity.
To determine

(b)

In budgetary bookkeeping, a cash flow statement, otherwise called statement of cash flows, is a fiscal report that demonstrates how changes in monetary record records and pay influence cash and cash reciprocals, and separates the examination to operating, investing, and financing activities.

To discuss:

For each activity that is reported on the statement of cash flows, indicate whether it produces a cash inflow, cash outflow, or no cash effect.

Expert Solution
Check Mark

Answer to Problem 52PSA

Particular Cash activity
a. Purchased property, plant, and equipment Outflow
b. Purchased merchandise inventory for cash Outflow
c. Recorded depreciation on property, plant, for cash and equipment No cash flow
d. Issued common stock for cash Inflow
e. Purchased merchandise inventory on credit No cash flow
f. Collected cash sales from customers Inflow
g. Paid cash dividends Outflow
h. Purchased a 2-year insurance policy for cash mortgage Outflow
i. Paid salaries of employees Outflow
j. Borrowed cash by issuing a note payable Inflow
k. Sold property, plant, and equipment for cash Inflow
1. Paid cash for principal amount of mortgage outflow
m. Paid interest on mortgage outflow

Explanation of Solution

The following activity explanation below:

Particular Cash activity Reasons
a. Purchased property, plant, and equipment Outflow Purchase and sale of fixed assets which is long term purpose, is identified in the investing activity.
b. Purchased merchandise inventory for cash Outflow Purchase of raw material and sold the finished goods is the normal activity and is to be considered in the operating activity.
c. Recorded depreciation on property, plant, for cash and equipment No cash flow As per the indirect method, depreciation is the non-cash item and added back in the operating activity.
d. Issued common stock for cash Inflow Taking borrowing from another institution or persons which is related outside the firm.
e. Purchased merchandise inventory on credit No cash flow Inventory purchase on the credit basic no cash yet outflow.
f. Collected cash sales from customers Inflow Sale of finished goods is the normal business activity, hence related to operating activity.
g. Paid cash dividends Outflow Paid cash to the shareholder and shareholder belongs to the share and share related to the financial activity.
h. Purchased a 2-year insurance policy for cash mortgage Outflow Cash paid for advance for the insurance. Adding in the operating activity and balance amount shown in the head of current assets.
i. Paid salaries of employees Outflow Salary paid to the employees is the normal activity and hence this activity considered in the operating activity.
j. Borrowed cash by issuing a note payable Inflow Loan taken or repayment of loan all item which is long-term must be considered in the financial activity.
k. Sold property, plant, and equipment for cash Inflow Purchase and sale of long-term term assets all must be considered in the investing activity.
1. Paid cash for principal amount of mortgage outflow Loan taken or repayment of loan all item which is long-term must be considered in the financial activity.
m. Paid interest on mortgage outflow Interest paid on the loan is also considered in the financial activity.

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Chapter 11 Solutions

Cornerstones of Financial Accounting

Ch. 11 - Prob. 11DQCh. 11 - Prob. 12DQCh. 11 - What does an increase in inventory imply? How...Ch. 11 - Prob. 14DQCh. 11 - Prob. 15DQCh. 11 - Prob. 16DQCh. 11 - Prob. 17DQCh. 11 - What balance sheet account changes might you...Ch. 11 - Prob. 19DQCh. 11 - Prob. 20DQCh. 11 - Prob. 21DQCh. 11 - Prob. 22DQCh. 11 - Prob. 23DQCh. 11 - Prob. 24DQCh. 11 - Which of the following is not a use of the...Ch. 11 - Which of the following would be classified as a...Ch. 11 - Prob. 3MCQCh. 11 - Which of the following is an example of a cash...Ch. 11 - Prob. 5MCQCh. 11 - Which of the following statements is true? a. Net...Ch. 11 - Mullinix Inc. reported the following information:...Ch. 11 - Which item is added to net income when computing...Ch. 11 - Refer to the information for Cornett Company...Ch. 11 - Prob. 10MCQCh. 11 - Chasse Building Supply Inc. reported net cash...Ch. 11 - Smoltz Company reported the following information...Ch. 11 - Prob. 13MCQCh. 11 - Classification of Cash Flows Stanfield Inc....Ch. 11 - Classification of Cash Flows Patel Company...Ch. 11 - Prob. 16CECh. 11 - Analyzing Changes in Balance Sheet Accounts Refer...Ch. 11 - Prob. 18CECh. 11 - Prob. 19CECh. 11 - Determining Net Cash Flow from Investing...Ch. 11 - Prob. 21CECh. 11 - Prob. 22CECh. 11 - Cash Receipts from Customers Singleton Inc. had...Ch. 11 - Prob. 24CECh. 11 - Prob. 25CECh. 11 - Prob. 26BECh. 11 - Prob. 27BECh. 11 - Analyzing Balance Sheet Accounts A review of the...Ch. 11 - Prob. 29BECh. 11 - Prob. 30BECh. 11 - Prob. 31BECh. 11 - Prob. 32BECh. 11 - Prob. 33BECh. 11 - Classification of Cash Flows A review of the...Ch. 11 - Classification of Cash Flows The following are...Ch. 11 - Analyzing Changes in Balance Sheet Accounts A...Ch. 11 - Analyzing the Accounts Casey Company uses a...Ch. 11 - Analyzing the Accounts The controller for Summit...Ch. 11 - Reporting Net Cash Flow from Operating Activities...Ch. 11 - Prob. 40ECh. 11 - Determining Cash Flows from Investing Activities...Ch. 11 - Determining Cash Flows 1from Investing Activities...Ch. 11 - Determining Cash Flows from Financing Activities...Ch. 11 - Prob. 44ECh. 11 - Partial Statement of Cash Flows Service Company...Ch. 11 - Prob. 46ECh. 11 - Prob. 47ECh. 11 - Preparing Net Cash Flows from Operating...Ch. 11 - Preparing a Statement of Cash Flows-Direct Method...Ch. 11 - Preparing a Statement of Cash Flows-Direct Method...Ch. 11 - Prob. 51ECh. 11 - Prob. 52PSACh. 11 - Prob. 53PSACh. 11 - Classification of Cash Flows Rolling Meadows...Ch. 11 - Prob. 55PSACh. 11 - Preparing a Statement of Cash Flows Monon Cable...Ch. 11 - Prob. 57PSACh. 11 - Preparing Net Cash Flows from Operating...Ch. 11 - Using a Spreadsheet to Prepare a Statement of Cash...Ch. 11 - Prob. 52PSBCh. 11 - Prob. 53PSBCh. 11 - Prob. 54PSBCh. 11 - Preparing a Statement of Cash Flows Volusia...Ch. 11 - Prob. 56PSBCh. 11 - Prob. 57PSBCh. 11 - Prob. 58PSBCh. 11 - Using a Spreadsheet to Prepare a Statement of Cash...Ch. 11 - Prob. 60.1CCh. 11 - Prob. 60.2CCh. 11 - Prob. 60.3CCh. 11 - Prob. 61.1CCh. 11 - Profitability Declines and the Statement of Cash...Ch. 11 - Prob. 61.3CCh. 11 - Prob. 61.4CCh. 11 - Prob. 62.1CCh. 11 - Prob. 62.2CCh. 11 - Prob. 62.3CCh. 11 - Income, Cash Flow, and Future Losses On January L...Ch. 11 - Income, Cash Flow, and Future Losses On January L...Ch. 11 - Income, Cash Flow, and Future Losses On January L...Ch. 11 - Prob. 63.4CCh. 11 - Researching Accounting Standards: Dissenting Views...Ch. 11 - Prob. 64.2CCh. 11 - Prob. 65.1CCh. 11 - Prob. 65.2CCh. 11 - Prob. 65.3CCh. 11 - Prob. 65.4CCh. 11 - Prob. 65.5CCh. 11 - Prob. 65.6CCh. 11 - Prob. 65.7CCh. 11 - Prob. 65.8CCh. 11 - Prob. 66.1CCh. 11 - Prob. 66.2CCh. 11 - Prob. 66.3CCh. 11 - Prob. 66.4CCh. 11 - Comparative Analysis: Under Armour, Inc., versus...Ch. 11 - Prob. 67.1CCh. 11 - CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT The...
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