Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 7, Problem 1Q
1. What type of transaction is a cash payment to creditors? How does this type of transaction affect the
Expert Solution & Answer
To determine
Find the transaction type of “cash payment to creditors” and explain the way it effects the accounting equation.
Explanation of Solution
Asset use transactions are the transactions that results in a decrease of both the asset and claims on assets.
It is an assets use transaction. Cash payment to creditors’ results in cash outflow which decreases the assets (cash) balance and it also decreases the liabilities (accounts payable) balance.
Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below.
Assets use transaction reduces both the sides of the accounting equation. That means it decreases the assets (cash) balance as well as it decreases the liabilities (accounts payable) balance.
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Students have asked these similar questions
Explanation? General Accounting
On January 1, 2023, Barber Corporation paid $1,160,000 to acquire Thompson Company. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson’s assets, liabilities, and stockholders' equity accounts on January 1, 2023:
Book Value
Fair Value
Current assets
$ 130,000
$ 130,000
Land
75,000
193,000
Building (twenty-year life)
250,000
276,000
Equipment (ten-year life)
540,000
518,000
Current liabilities
26,000
26,000
Long-term liabilities
124,000
124,000
Common stock
233,000
Additional paid-in capital
389,000
Retained earnings
223,000
Thompson earned net income for 2023 of $134,000 and paid dividends of $51,000 during the year.
If Barber Corporation had net income of $468,000 in 2023, exclusive of the investment, what is the amount of consolidated net income?
Firm this information
Chapter 7 Solutions
Survey Of Accounting
Ch. 7 - 1. What type of transaction is a cash payment to...Ch. 7 - Prob. 2QCh. 7 - How does recording accrued interest affect the...Ch. 7 - 4. Who is the maker of a note payable?Ch. 7 - How does the going concern assumption discussed in...Ch. 7 - 6. Why is it necessary to make an adjusting entry...Ch. 7 - Assume that on October 1, 2018, Big Company...Ch. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 - 11. Are contingent liabilities recorded on a...Ch. 7 - Prob. 12QCh. 7 - Prob. 13QCh. 7 - Prob. 14QCh. 7 - Prob. 15QCh. 7 - Prob. 16QCh. 7 - 1. What is the difference between classification...Ch. 7 - 2. At the beginning of Year 1, B Co. has a note...Ch. 7 - 3. What is the purpose of a line of credit for a...Ch. 7 - 4. What are the primary sources of debt financing...Ch. 7 - 5. What are some advantages of issuing bonds...Ch. 7 - 6. What are some disadvantages of issuing bonds?Ch. 7 - 7. Why can a company usually issue bonds at a...Ch. 7 - 15. If Roc Co. issued 100,000 of 5 percent,...Ch. 7 - 16. What is the mechanism is used to adjust the...Ch. 7 - 17. When the effective interest rate is higher...Ch. 7 - 18. What type of transaction is the issuance of...Ch. 7 - 19. What factors may cause the effective interest...Ch. 7 - 20. If a bond is selling at 97, how much cash will...Ch. 7 - Prob. 30QCh. 7 - 22. Gay Co. has a balance m the Bonds Payable...Ch. 7 - Prob. 32QCh. 7 - Prob. 33QCh. 7 - Recognizing accrued interest expense Abardeen...Ch. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Effect of warranties on income and cash flow To...Ch. 7 - Effect of warranty obligations and payments on...Ch. 7 - Principle due at maturity versus installments...Ch. 7 - Prob. 9ECh. 7 - Amortization of a long-term loan A partial...Ch. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Prob. 14ECh. 7 - Exercise 7-15 Straight-line amortization of a bond...Ch. 7 - Prob. 16ECh. 7 - Prob. 17ECh. 7 - Prob. 18ECh. 7 - Prob. 19ECh. 7 - Prob. 20ECh. 7 - Prob. 21ECh. 7 - Exercise 7-22 Preparing a classified balance sheet...Ch. 7 - Exercise 7-23 Effective interest amortization of a...Ch. 7 - Prob. 24ECh. 7 - Prob. 25ECh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Problem 7-29 Current liabilities The following...Ch. 7 - Prob. 30PCh. 7 - Prob. 31PCh. 7 - Problem 7-32 Accounting for a line of credit Elite...Ch. 7 - Prob. 33PCh. 7 - Prob. 34PCh. 7 - Problem 7-35 Straight-line amortization of a bond...Ch. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Writing Assignment Definition of elements of...Ch. 7 - Prob. 5ATC
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- Not use ai given answer general Accountingarrow_forwardStrama, Inc., manufactures and sells two products: Product A6 and Product Is. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Expected Activity Activity Cost Pools Activity Measures Estimated Overhead Cost (5) Product A6 | Product Is Total Labor-related Production orders Order size DLHs $187,682 9,300 Orders $39,125 2,350 4,900 2,750 14,200 5,100 MHS $175,140 7,600 7,800 15,400 $ 401,897 The activity rate for the Order Size activity cost pool under activity-based costing is: A. $29.58 per MH B. $15.10 per MH C. $11.87 per MH D. $19.80 per MHarrow_forwardPell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2022 2023 2024 Net income $ 100,000 $ 120,000 $ 130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. Compute Pell's equity income from Demers for the year ended December 31, 2022. Multiple Choice $42,400 $74,400 $73,000 $41,000 $80,000arrow_forward
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