
Concept explainers
a.
Record the events in the
a.

Explanation of Solution
Record the events in accounting equation:
Table (1)
Working note 1: Calculate the amount of Accrued interest for 2014:
Working note 2: Calculate the amount of Accrued interest for 2015:
b.
Identify the amount of net
b.

Explanation of Solution
Cash flows from operating activities refer to the cash received or cash paid in day-to-day operating activities of a company.
Calculate the cash flow from operating activities:
Corporation I | ||
Statement of cash flow | ||
Particulars | Amount ($) | Amount ($) |
Cash flow from operating activities | ||
Cash collected from revenue | $46,000 | |
Cash paid for operating expenses | ($27,000) | |
Net cash flow from operating activities | $19,000 |
Table (2)
Thus, the cash flow operating activities is $19,000 is the amount that would be reported on the statement of cash flows.
c.
Identify the amount of interest expense that would be reported on the 2014 income statement.
c.

Explanation of Solution
Interest expense refers to the cost of debt which is incurred during a particular accounting period. The interest amount is a fixed interest rate payable on the principal amount of debt.
The amount of interest expense that would be reported on the 2014 income statement is $1,200 (1).
Thus, the interest expense is $1,200 the amount that would be reported on the income statement.
d.
Identify the amount of total liabilities that would be reported on the 2014
d.

Explanation of Solution
Total liabilities are the sum of financial obligations and debt owed by business.
Calculate the total liabilities:
Particulars | Amount ($) | Amount ($) |
Notes payable | 20,000 | |
Interest payable | 1,200 | |
Total liabilities | 21,200 |
Table (3)
Thus, the amount of total liabilities that would be reported on the 2014 balance sheet is $21,200.
e.
Identify the amount of
e.

Explanation of Solution
Retained earnings are the portion of earnings kept by the business for the purpose of reinvestments, payment of debts, or for future growth.
The amount of retained earnings that would be reported on the 2014 balance sheet is $25,800.
f.
Identify the amount net cash flow from financing activities that would be reported on the 2014 statement of cash flows.
f.

Explanation of Solution
Cash flow from financing activities:
This section of cash flows statement provides information about the
Compute the cash from operating activities:
Corporation I | ||
Statement of cash flow | ||
Particulars | Amount ($) | Amount ($) |
Cash flow from financing activities | ||
Loan borrowed | $20,000 | |
Net cash flow from operating activities | $20,000 |
Table (4)
Thus, the amount of cash flow from financing activities that would be reported on the statement of cash flow is $20,000.
g.
Identify the amount of interest expense that would be reported on the 2015 income statement.
g.

Explanation of Solution
Interest expense refers to the cost of debt which is incurred during a particular accounting period. The interest amount is a fixed interest rate payable on the principal amount of debt.
The amount of interest expense that would be reported on the 2015 income statement is $400 (2).
h.
Identify the amount of net cash flow from operating activities that would be reported on the 2015 Statement of cash flows.
h.

Explanation of Solution
Cash flows from operating activities refer to the cash received or cash paid in day-to-day operating activities of a company.
Calculate the cash flow from operating activities:
Corporation I | ||
Statement of cash flow | ||
Particulars | Amount ($) | Amount ($) |
Cash flow from operating activities | ||
Cash collected from | $63,000 | |
Cash paid for operating expenses | ($36,000) | |
Cash paid for interest | ($1,600) | |
Net cash flow from operating activities | $25,400 |
Table (5)
Thus, the cash flow operating activities that would be reported on the statement of cash flows is $25,400.
i.
Identify the amount of total assets that would be reported on the 2015 balance sheet.
i.

Explanation of Solution
Calculate the total assets:
Particulars | Amount ($) | Amount ($) |
Cash | 44,400 | |
Accounts receivable | 10,000 | |
Total liabilities | 54,400 |
Table (6)
Thus, the amount of total assets that would be reported on the 2015 balance sheet is $54,400
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Chapter 7 Solutions
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