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Category > Accounting Posted 16 Aug 2017 My Price 13.00

accounting cycle

31.   Effect of various transactions on the statement of cash flows. Exhibit 6.12 shows a simpli- fied statement of cash flows for a period. Numbers appear on 11 of the lines in the state- ment. Other lines are various subtotals and grand totals; ignore these in the  remainder of the problem. Assume that the accounting cycle is complete for the period and that the firm has prepared all of the financial statements. It then discovers that it has overlooked a transaction. It records that transaction in the accounts and corrects all of the financial statements. For each of the following transactions, indicate which of the numbered lines of the statement of cash flows change, and state the amount and direction of the change. If net income, line (3), changes, be sure to indicate whether it decreases or increases. Ignore income tax effects. (Hint: First, construct the entry the firm would enter in the accounts to record the transaction in the accounts. Then, for each line of the journal entry, identify the line of Exhibit 6.12 affected.)

a.   Amortization of a patent, treated as an expense, $600.

b.   Acquisition of a factory site financed by issuing capital stock with a market value of

$50,000 in exchange.

c.    Purchase of inventory on account for $7,500; assume inventory had increased for the year before the firm recorded this overlooked transaction.

d.   Purchase of inventory for cash of $6,000; assume inventory had increased for the year before the firm recorded this overlooked transaction.

 

 

 

 
  Text Box: © Cengage Learning 2014

 

Text Box: © Cengage Learning 2014206                                Chapter 6     Statement  of  Cash Flows

 

 

 

e.    Uninsured fire loss of merchandise inventory totaling $1,500; assume inventory had increased for the year before the firm recorded this overlooked transaction.

f.    Collection of an account receivable totaling $1,450; assume accounts receivable had increased for the year before the firm recorded this overlooked transaction.

g.   Issue of bonds for $10,000 cash.

h.   Sale of equipment for cash at its carrying value of $4,500.

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Maurice Tutor
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Status NEW Posted 16 Aug 2017 08:08 PM My Price 13.00

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