ACCT 321 Chapter 5 Exercises

Paper Co. had net income of $70,000 during the year. The dividend payment was $10,000. The following information is available: Mortgage repayment$20,000Available-for-sale debt securities purchased10,000 increaseBonds payable-issued50,000 increaseInventory40,000 increaseAccounts payable30,000 decrease What amount should Paper report as net cash provided by operating activities in its Statement of Cash Flows for the year?

$0

Addison, Inc. reports: Cash provided by operating activities$2,300,000Cash used by investing activities640,000Cash used by financing activities220,000Beginning cash balance340,000 What is Addison's ending cash balance?

$1,780,000

New England Co. had net cash provided by operating activities of $351,000; net cash used by investing activities of $420,000; and cash provided by financing activities of $250,000.New England's cash balance was $27,000 on January 1. During the year, there was a sale of land that resulted in a gain of $25,000, and proceeds of $40,000 were received from the sale.What was New England's cash balance at the end of the year?

$208,000

Peterson Enterprises reports the following information: Net income$5,000,000Depreciation expense680,000Loss on the sale of investments154,000Increase in accounts receivable320,000 Peterson should report cash provided by operating activities of

$5,514,000.

1. preferred stock 2. Goodwill 3. salary and wages payable 4. buildings 5. accounts payable 6. equity investments (to be sold in one year) 7. current maturity of long term investments 8. Premium on bonds payable. 9. Allowance for doubtful accounts. 10. Accounts receivable. 11. Cash surrender value of life insurance. 12. Notes payable (due next year). 13. Supplies. 14. Common stock. 15. Land. 16.Bond sinking fund. 17. Inventory. 18. Prepaid insurance. 19.Bonds payable. 20. Income taxes payable.

1. capital stock 2. intangible asset 3. current liabilities 4. PPE 5. current liabilities 6. current assets 7. current liabilities 8. noncurrent liabilities 9. current assets 10. current assets 11. investments 12. current liabilities 13. current assets 14. capital stock 15. PPE 16. investments 17. current assets 18. current assets 19. noncurrent liabilities 20. current liabilities

1. debt investment 2. Treasury Stock. 3. Common Stock. 4. Dividends Payable. 5. Accumulated Depreciation-Equipment. 6. Construction in Process (Constructed for another party). 7. Construction in Process (Constructed for the use of Deep Blue Something, Inc.). 8. Petty Cash. 9. Interest Payable. 10. Deficit. 11. Equity Investments (ownership stake of less than 20%). (Expected to be sold within one year.) 12. Income Taxes Payable. 13. Unearned Subscriptions Revenue. 14. Work in Process 15. Salaries and Wages Payable.

1. current asset 2. stockholders' equity 3. Stockholders' equity 4. current liability 5. PPE 6. Current Assets 7. PPE 8. Current asset 9. Current Liability 10. Stockholders' equity 11. Current asset 12. Current liability 13. Current asset 14. Current liability

1. Issuance of common stock. 2. Purchase of land and building. 3. Redemption of bonds. 4. Sale of equipment. 5. Depreciation of machinery. 6. Amortization of patent 7. Issuance of bonds for plant assets. 8. Payment of cash dividends. 9. Exchange of furniture for office equipment. 10. Purchase of treasury stock. 11. Loss on sale of equipment 12. Increase in accounts receivable during the year 13. Decrease in accounts payable during the year.

1. financing activity 2. investing activity 3. Financing activity 4. investing activity 5. operating activity - add to net income 6. operating activity - add to net income 7. Reported as significant noncash activity 8. financing activity 9. reported as significant noncash activity 10. financing activity 11. operating activity- add to net income 12. operating activity- deduct from net income 13. operating activity- deduct from net income

Identify where the follow would go on the balance sheet 1.) preferred stock 2.) goodwill 3.) salary and wages payable 4.) accounts payable 5.) buildings 6.) equity investments 7.) current maturity of long term debts 8.) premium on bonds payable 9.) allowance for doubtful accounts 10.) accounts recievable 11.) cash surrender value of life insurance 12.) notes payable 13.) supplies 14.) common stock 15.) land 16.) bond sinking fund 17.) inventory 18.) prepaid insurance 19.) bonds payable 20.) income taxes payable

1.) capital stock 2.) goodwill 3.) current asset 4.) current liability 5.) property, plant, and equipment 6.) current asset 7.) current liabilities 8.) noncurrent liabilities 9.) current assets 10.) current assets 11.) noncurrent liabilities 12.) current liabilities 13.) current assets 14.) capital stock 15.) property, plant, and equipment 16.) long-term investments 17.) current assets 18.) current assets 19.) long-term liabilities 20.) current liabilities

Which of the following is not one of the classifications in owners' equity?

Accumulated capital. Classifications included in owners' equity include capital stock, retained earnings, additional paid-in capital (not accumulated capital), and noncontrolling interest (minority interest).

The premium on a 3-year insurance policy expiring on December 31, year 3, was paid in total on January 1, year 1. Assuming that the original payment was recorded as a prepaid asset, how would total assets and stockholders' equity be affected during year 3?

Both total assets and stockholders' equity would decrease.

(T/F) The balance sheet is sometimes referred to as the Statement of Net Resources.

False, A balance sheet reports on the financial position of a business enterprise and is sometimes referred to as the Statement of Financial Position, not the Statement of Net Resources.

Which of the following would be reported as a long-term investment at December 31, 2017?

Land held for speculative purposes.

Which of the following is included in an owners' equity section reported in the balance sheet?

Noncontrolling interest, Classifications included in owners' equity include capital stock, retained earnings, additional paid-in capital (not accumulated capital), and noncontrolling interest (minority interest).

Assets include all of the following subclassifications except

Noncontrolling interest. Assets include 5 subclassifications: current, long-term investments, property, plant & equipment, intangibles, and other. Noncontrolling interest is a section in the stockholders' equity section of the balance sheet.

The balance sheet is useful for analyzing all of the following except

Profitability. The balance sheet is not used in analyzing profitability.

Which of the following pairings of an item and a basis of valuation is incorrect?

Receivables - Lower-of-cost-or-market. Receivables are valued at estimated amount collectible (not lower-of-cost-or-market), and inventories are valued at lower-of-cost-or-market. The other pairings are all correct.

A company that wishes to disclose information about the effect of changing prices should report this information in

Supplementary information to the financial statements.

Other assets include all of the following except:

Timberlands, Other assets include restricted cash, property held for sale, and assets in special funds. Timberlands are reported as part of property, plant, and equipment.

Which of the following investments should always be reported as current assets?

Trading securities

(T/F) A balance sheet reports on the financial position of a business enterprise and is sometimes referred to as the Statement of Financial Position, not the Statement of Net Resources.

True

(T/F) Companies frequently use judgments and estimates in valuing items on the balance sheet.

True

(T/F) Liquidity refers to the amount of time that is expected to elapse until a liability has to be paid.

True

(T/F) A liability that is payable within the next year is sometimes included in long-term debt.

True. A liability that is payable within the next year is sometimes included in long-term debt if the company expects to refinance the debt through another long-term issue or to retire the debt out of non-current assets.

Identify where the follow would go on the balance sheet a.) debt investment b.) treasury stock c.) common stock d.) dividends payable e.) accumulated depreciation - equipment f.) construction in process g.) petty cash h.) interest payable i.) deficit j.) equity investment (ownership stake of less than 20%) k.) income taxes payable l.) unearned subscription revenue m.) work-in process n.) salary and wages expense

a.) current asset or long-term investment b.) equity c.) shareholders' equity d.) current liabilities e.) property, plants, and equipment f.) current asset or PPE g.) current asset h.) current liability i.) shareholders' equity j.) current asset k.) current liability l.) current liability m.) current asset n.) current liability

Which of the following is not one of the classifications in owners' equity?

accumulated capital

The correct order to present current assets is

cash, accounts receivable, inventories, prepaid items.

Which of the following is an intangible asset?

customer lists

Payment of dividends would come under which activity on the statement of cash flows?

financing activities

A company with a _________________ is better able to survive bad times, to recover from unexpected setbacks, and to take advantage of profitable and unexpected investment opportunities.

higher degree of financial flexibility

Which of the following would be added back to net income in the operating activities section of the statement of cash flows?

increase in accounts payable

Activities that involve the cash effects of making and collecting loans and acquiring and disposing of property, plant, and equipment are classified as:

investing activities

Major limitations of the balance sheet include all of the following except: a.) most assets and liabilities are reported at historical cost. b.) it necessarily omits many items that are of financial value but cannot be recorded objectively. c.) judgments and estimates are used to determine many of the items reported. d.) only amounts known with absolute certainty are reported.

only amounts known with absolute certainty are reported.

Receipt of interest from a Note Receivable would be reported as a cash inflow in which of the following sections:

operating activities

The cash effects of transactions that enter into the determination of net income are

operating activities

The balance sheet is useful for analyzing all of the following except solvency, liquidity, financial flexibility, or profitability

profitability

____________ is the ability of a company to pay its debts as they mature.

solvency

Which of the following statements shows the amount of cash used to pay dividends or purchase treasury stock?

statement of stockholders' equity

Companies are not required to disclose information about:

the identity of all stockholders.